Exact Matching Required in PM(NOC) Listing of Dosage Claims

Purdue Pharma v Canada (Attorney General) / TARGIN 2011 FCA 132 Layden-Stevenson JA: Blais CJ, Stratas JA aff’g 2010 FC 738 Crampton J

As described in the previous post, Purdue Pharma sought to list 2,098,738 against TARGIN. TARGIN is a controlled release combination of two active ingredients, oxycodone and naloxone. The ‘738 patent claims a controlled release oxycodone formulation “comprising” oxycodone in a matrix. None of the claims expressly mention naloxone. Yesterday's post critiqued the FCA’s suggestion that the ‘738 patent was restricted to drugs containing only oxycodone, so that TARGIN could not infringe. If TARGIN could not infringe, the ‘738 patent would not be eligible for listing. However, even if TARGIN might fall within the scope of the ‘738 patent, it does not follow that the ‘738 patent can be listed. Since the 2006 amendments it is clear that list eligibility and infringement do not exactly coincide: it is not true that any patent that would be infringed by production of a particular drug is therefore eligible for listing against that drug (RIAS to SOR/2006-242 at 1512). Even if TARGIN potentially infringes, listing eligibility is a distinct question. This is the issue of “product specificity.” Is the match between the product and the patent sufficiently close?

“Comprising”

Purdue Pharma v Canada (Attorney General) 2011 FCA 132 Layden-Stevenson JA: Blais CJ, Stratas JA aff’d 2010 FC 738 Crampton J

Purdue Pharma sought to list patent 2,098,738 against TARGIN under the PM(NOC) regulations. TARGIN is a controlled release combination of two active ingredients, oxycodone and naloxone. The ‘738 patent claims a controlled release oxycodone formulation “comprising” oxycodone in a matrix. None of the claims expressly mention naloxone. Does the ‘738 patent encompass TARGIN? If it does not, then a generic version of TARGIN cannot infringe, and the ‘738 patent is not eligible for listing. That question, which turns on the meaning of “comprising”, is the subject of this post. Whether the ‘738 patent would be eligible for listing even if the TARGIN did potentially infringe is a separate question which will be discussed in a subsequent post.

Normally “comprising” defines an open-ended list which does not exclude additional unrecited elements or method steps. On this standard interpretation, a formulation of TARGIN which used the claimed controlled released technology would infringe the ‘738 patent. However, Crampton J accepted the submission of the OPML that in this patent, “comprising” was a limiting term, from which is follows that TARGIN would not infringe.

No Section 8 Damages for Permanent Loss of Market Share

Teva Canada Ltd v Sanofi-Aventis Canada Inc / ramipril (NOC) 2011 FCA 149 Dawson JA: Noël JA; Sharlow JA dissenting, affm’g 2010 FC 1210 Simpson J, affm’g 2010 FC 150 Milczynski Pr

In Sanofi-Aventis / ramipril 2011 FCA 149 Dawson JA, in a brief decision from the bench for herself and Noël JA, affirmed the FCA’s holding in Merck Frosst Canada Ltd v Apotex Inc / alendronate (NOC) 2009 FCA 187 that section 8 of the NOC regulations does not permit recovery of losses – in particular loss of market share – suffered after the expiry of the statutory stay, even if those losses were caused by the stay. Sharlow JA in dissent was of the view that Merck Frosst was wrongly decided [14], while the majority felt it should not be disturbed [5]. (Note that Noël JA wrote for the Court in Merck Frosst.)

Sharlow JA dissented on the basis that “[t]he damages contemplated by section 8 are intended to be analogous to the undertaking a party is normally required to offer when seeking an interlocutory injunction in ordinary commercial litigation,” and “an undertaking in damages is normally broad enough to cover all losses resulting from the injunction” [12]. There is a great deal to be said for Sharlow JA’s position as a matter of principle. On the other hand, while section 8 is analogous to an undertaking, it is not one. The rights of the second person are defined by the regulations, and, as the various RIASes make clear, the scheme as a whole is intended to "balance" enforcement of patent rights with encouragement of generic entry. Thus while Sharlow JA at [14] criticized as a "narrow" and "literal" interpretation of the relevant provision in Merck Frosst, it is quite reasonable to suppose that an interpretation which is in some ways unprincipled may be required to give effect to the precise balance sought by the legislature. This was in effect the position taken by the FCA in Merck Frosst at [101-102] in having regard primarily to the text rather than principles of causation in interpreting the amended section 8.

Guidance for Pleading Early Infringement

Apotex Inc v Allergan Inc / gatifloxacin 2011 FCA 134

Pharmaceutical patentees view damages as a poor substitute for a permanent injunction, and are therefore anxious to bring an action against a generic producer as soon as possible. The question of what acts constitute infringement, or are sufficient to support a quia timet action, are therefore important. The FCA decision in Allergan, affirming a decision of Beaudry J refusing to strike Allergan’s statement of claim, helps to fill in this picture.

The Federal Courts have consistently been unwilling to allow an infringement action to be brought simply on the basis that the generic has applied for or obtained an NOC. In Allergan the Court of Appeal stated that “the mere fact that a defendant pharmaceutical company has sought regulatory approval to market a medicine does not by itself support an action for patent infringement” [4]. This point had not previously been settled (see AstraZeneca 2010 FCA 112 [8-9], affm’g 2009 FC 1209), and while this statement was strictly obiter, it is consistent with the thrust of the prior case-law. The point must now be considered settled.

However, in Allergan the patentee did not rely on the generic having obtained an NOC. Rather, the main thrust of its allegations was that Apotex had obtained a tentative approval for a US ANDA, and that the ANDA indicated that Apotex had made infringing product in Canada, and that it had and intended to import infringing product into Canada for formulation and export to the US: see the decision appealed from, T-1267, 9 Nov 2010. Consequently, it was not a quia timet action at all: “[t]he claims of past and continuing infringement support the claim of future continuing infringement” [14].

This point is not directly relevant to the paradigmatic case in which the patentee seeks to prevent manufacture and sale into the Canadian market. Of more general interest is the holding respecting particularity of the pleading. The courts have consistently been unwilling to allow an action based on a bald general allegation of infringement, on the basis that an action cannot be allowed to serve as a fishing expedition: the leading case is AstraZeneca (see esp. 2009 FC 1209 [17]) and see Eli Lilly / olanzapine 2011 FC 255 [8-9], also striking the statement of claim. The particulars pleaded in Allergan did go beyond those pleaded in either AstraZeneca or Eli Lilly, and the FCA held at [8] that it was reasonably open to the trial judge to hold that they were adequate. Thus we now have case-law on both side of the line separating adequate from inadequate pleading of material facts.

In Allergan Apotex also argued that Allergan’s statement of claim should be struck on the basis that the regulatory use exception of s. 55.2(1) applies, as in Eli Lilly. However, as the FCA pointed out [12-13], Allergan is distinguishable as in Eli Lilly “there is absolutely nothing pleaded that is not part of the regulatory requirements” (2011 FC 255 [28]), while in Allergan the allegations clearly went beyond those requirements. The FCA also stated that “the existence of even a strong defence to a claim does not justify an order striking the claim” [9]. This is not entirely easy to reconcile with Eli Lilly, but in any event, the FCA relied mainly on the differences in the allegations.

Hiatus until May 11

I will be grading exams for the rest of the week, and then off for a two week vacation. I expect to resume blogging on May 11th.

Validity as a Defence to a Section 8 Action

Apotex Inc. v. Shire Canada Inc. / modafinil (NOC) 2011 FC 436 Tabib P

The modafinil litigation raises the question of whether a generic which has succeeded in an NOC proceeding can get section 8 damages even if the patent is subsequently determined to be valid and infringed in an infringement action. Shire is a licencee under the relevant patent and holds an NOC. The patent is owned by Cephalon. Apotex initiated NOC proceedings against Shire and was successful: 2008 FC 538. Apotex then brought an action against Shire for section 8 damages. In the meantime, Cephalon has filed an action for infringement against Apotex. In 2010 Shire sought to amend its statement of defence to add a defence to the effect that if Cephalon is successful in its action against Apotex, then Apotex should not be allowed to recover against Shire under section 8. It is important to note that at that time Shire did not propose to bring any evidence on the issue of validity and infringement; it wished to rely entirely on the outcome of the Cephalon action. This amendment was not permitted (2010 FC 828 affm’d 2010 FC 1001), on the basis that the Shire had not pleaded any material facts on which the court could make any direct determination. If Shire’s defence had been permitted, the outcome of the Shire action would depend entirely on the outcome of the Cephalon action, which is completely independent. In this motion, Shire sought to amend its statement of defence to plead directly that Apotex infringes. Prothonotary Tabib J dismissed this motion on the basis the Shire had not sought this amendment in a timely manner [40]. We therefore do not have any indication on the merits as to whether such a defence would be permitted. However, the modafinil litigation shows that there is no satisfactory answer.

The Court’s holding in 2010 FC 1001, that for procedural reasons Shire cannot be allowed to rely on the outcome of the Cephalon litigation, is entirely reasonable. The parties in the Shire litigation have no control over the Cephalon litigation, which might be prolonged indefinitely. But if Shire had raised the defence in a timely manner, and the amendment sought in this decision had been allowed, this would require an entirely separate determination of the validity of the modafinil patent as part of the section 8 action, in addition to the determination originally made as part of the main NOC proceeding, and also in addition to determination to be made in the Cephalon action. It is surely a waste of resources to have the same patent litigated three times against the same party.

In my discussion of the levoflaxin litigation I suggested that a subsequent finding of validity would not bar a section 8 claim in any event because of the “no reach back” rule articulated in Apotex v Syntex / naproxen (NOC) 2010 FCA 155. Whether that suggestion is correct remains to be seen. If it is, then the generic will be entitled to damages for having been kept out of a market that it had no right to enter, which is not satisfactory. If both the NOC litigation and the subsequent infringement action were between the same parties, as is often the case, then a cure for this might be to allow the patentee to claim reimbursement of the section 8 damages as part of its damages in the infringement action. Apart from any conceptual problems this might raise, the modafinil litigation shows that this is not a general solution, because the here parties are different; payment by Shire under section 8 is not a loss to Cephalon.

If this analysis is right, it is difficult to see how even an amendment to the NOC regulations could help matters. Perhaps there is some creative solution to the problem that is not apparent to me. But for now it looks as though this is another aspect of the problems caused by the separation of the statutory stay under the NOC regulations from the underlying infringement action: see here, here and here, for previous posts on this issue.

Payment of Fees by the Wrong Agent – A Glimmer of Hope

Excelsior Medical Corporation v. Canada (Attorney General) 2011 FC 407 Hughes J

Hot on the heels of Unicrop 2011 FCA 55 affm’g 2010 FC 61 (discussed here), Excelsior Medical is another case in which an applicant changed patent agent but failed to notify the Patent Office of the change, with the result that maintenance fees were not tendered by the “authorized correspondent,” as required by Rule 6(1), prior to the expiry of the grace period for reinstatement of an application that has been deemed abandoned for failure to pay those fees. Unicrop held that the Commissioner is entitled to refuse payment, with the result on the facts that the application was held to be incurably abandoned.

Excelsior Medical provides a slender ray of hope for such an applicant. Where in Unicrop the Patent Office had refused the fees paid by the wrong agent, in Excelsior Medical the Patent Office accepted the fees and sent a notice to the agent of record stating that the application had been reinstated [6]. This was apparently an automatic response, generated without substantive review. On review, the Patent Office sent a further letter rescinding the reinstatement, on the basis that the fee should not have been accepted [4.12]. By the time this letter was received, the grace period had expired. Hughes J held that when the Commissioner receives and acts upon a communication, the application is reinstated, and the Commissioner cannot “un-perform” that function [38], [41]. (Unfortunately for the applicant, on the facts the new agent had subsequently requested and accepted a refund, and the application then became incurably dead [42].) 

While this result is fair and reasonable, it is perhaps difficult to reconcile with the mandatory language of Rule 6(1), which states that the Commissioner “shall only have regard to communications from[] the authorized correspondent.” But a line must be drawn somewhere; it seems inconceivable, for example, that a patent could be declared invalid ab initio after having been granted and enforced, if it were discovered that fees had been paid by the wrong agent at some point during the application process. On the modern approach to statutory interpretation, the text must be interpreted in light of its purpose, and not in a purely literal fashion.

Hughes J also indicated that if detrimental reliance had been established, which it had not been on the facts, he would have considered the possibility of ordering equitable relief. The difficulty with this thought is that both levels of court in Unicrop refused to invoke equitable principles to order the reinstatement of the application despite expiry of the deadline: “equitable relief cannot be invoked in order to counter the application of a clear statutory rule” [FCA 38].

In the end, Hughes J did his best to temper the application of Rule 6(1), but all he could do was to provide a narrow window that will benefit few applicants. The root of the problem lies with the rule itself.

Obvious to Try – In Two Jurisdictions

Merck Sharp & Dohme Corp v Teva UK Ltd [2011] EWCA Civ 382 (08 April 2011) affm’g [2009] EWHC2952 (Pat)
Merck & Co. Inc. v Apotex Inc. / cosopt (NOC) 2010 FC 1042 O'Reilly J

In 2010 FC 1042 O'Reilly J refused an order of prohibition on a generic version of Merck’s Cosopt product for the treatment of glaucoma, on the basis that the co-formulation of dorzolamide and timolol claimed in Merck’s patent 2,065,965 was obvious. A prior art publication by Merck’s own researchers (the “Nadin” article) disclosed that dorzolamide and timolol had an additive effect, but did not specifically disclose co-formulation, as opposed to sequential administration. The question was whether co-formulation was obvious in light of that disclosure. O’Reilly J applied the “obvious to try” analysis. It seems (from the brief reasons) that it was conceded that it was obvious to try, and O’Reilly J found that there were no significant hurdles to be overcome – “co-formulation was routine” – and the co-formulation was therefore obvious. In [2009] EWHC 2952 (Pat) Floyd J held the same in an infringement action on the corresponding European patent patent EP 0 509 752 B1 for essentially the same reasons. (The main difficulty is that the two products perform optimally at different pH, so some experimentation was needed in arriving at an appropriate compromise, but there was no real difficulty in so doing.) Floyd J's decision was affirmed by [2011] EWCA Civ 382, which was released last Friday.

So far, so good. OReilly J’s decision is a good illustration of the application of the “obvious to try” analysis to hold that a claim invalid, and it is a nice bonus to see courts in different jurisdictions coming to the same conclusion on the same facts.

I have one quibble with the EWCA decision. Merck decided not to argue that the leap from co-adminstration to co-formulation was qualitatively inventive; instead it argued that the time between the publication of the Nadin article and the priority date was so short (six days) that the skilled team would have been unable to carry out the requisite experiments, routine though they might be [EWCA 31]. The EWCA rejected this, saying, inter alia, “If by reference to the relevant state of the art the invention is obvious then it matters not that it may take time to perform the necessary routine tests. It is a matter of simple comparison between the relevant art and the claimed invention” [36]. It is questionable whether this statement is consistent with Canadian law, as the Supreme Court in Sanofi [69] held that it is relevant to ask “[w]hat is the extent, nature and amount of effort required? Are routine trials carried out or is the experimentation prolonged and arduous, such that the trials would not be considered routine?” It is not merely a simple comparison between the relevant art and the claimed invention. In Canadian law the quantity of experimentation – the “amount of effort” – is relevant, not only the quality. As the Sanofi excerpt indicates, trials that are prolonged and arduous will not be considered routine, even if individually they may not require special skill. This is consistent with the view that a “patient searcher is as much entitled to the benefits of a monopoly as someone who hits upon an invention by some lucky chance or inspiration" American Cyanamid Co. v Berk Pharmaceuticals Ltd., 1976} R.P.C. 231, at 257, quoted with approval in Farbwerke Hoechst Aktiengesellschaft Vormals Meister Lucius & Bruning v Halocarbon (Ontario) Ltd. [1979 2 SCR 929. (This is not to say that the co-formulation in this case should have been held to be inventive in Canadian law. The basis for the decision of O’Reilly was there was no evidence of undue experimentation, and Floyd J’s decision might have been upheld on the same basis.)

This might seem like an overly technical reading of the EWCA decision, and perhaps it is. After all, the mere fact that it takes time to perform routine trials (if a fixed incubation period is required for what is otherwise a simple test, for example) would not render an invention obvious in Canadian law. However, the English courts have more than once indicated that routine work, no matter how prolonged and arduous, cannot amount to invention. This was expressed succinctly by Aldous LJ for the CA in Biogen Inc v Medeva PLC Court of Appeal (Civil Division) [1995] FSR 4: “There is no idea, no principle. A mere commercial decision is not an invention.” This was reversed by the House of Lords on the facts, [1996] UKHL 18 [53] but apparently agreeing with Hobhouse LJ on this point. My own view is that the Canadian position is preferable as a matter of policy, as it is more consistent with the incentive rationale for patent protection. But it should in any event be recognized that there is a principled point of difference here, and UK law should not be blindly followed.

Stay of Execution Pending Appeal

Phostech Lithium Inc v Valence Technology, Inc 2011 FCA 107 Pelletier JA

In Phostech v Valence 2011 FCA 107 Pelletier JA granted a stay pending appeal of the judgment of Gauthier J in 2011 FC 174. It is interesting to contrast this decision with that of the EWCA in Virgin Atlantic v Premium Aircraft [2009] EWCA Civ 1513 Jacob LJ: Patten LJ, Kitchin J granting a partial stay (a “carve-out”) pending a decision on an application for leave to appeal to the UK Supreme Court.

The major difference is that the FCA in Phostech applied the Cyanamid threshold of “a serious issue to be tried” on the merits portion of the test, while the EWCA did not, saying:

22 It should be noted the question is not the same when one is considering what to do on an application for an interim injunction pending trial. In that case the patentee has yet to establish his right, whereas after successful trial he has prima facie done just that.

Surely this is a compelling argument. The reason given by Lord Denning in American Cynamid for lowering the old threshold of “a prima facie case” to “a serious question to be tried” was that “[i]t is no part of the court's function at this stage of the litigation to try to resolve conflicts of evidence on affidavit as to facts on which the claims of either party may ultimately depend nor to decide difficult questions of law which call for detailed argument and mature considerations. These are matters to be dealt with at the trial" [1975] AC 396, 407. It follows directly that once the matter has been decided at trial, it is legitimate to consider the merits. Indeed, this was the position taken by the Supreme Court in Laboratoire Pentagone Ltée v. Parke, Davis & Co. [1968] SCR 269, a patent case in the Supreme Court refused a stay of execution pending appeal:

The burden upon the appellant is much greater than it would be if the injunction were interlocutory. In such a case the Court must consider the balance of convenience as between the parties, because the matter has not yet come to trial. In the present case we are being asked to suspend the operation of a judgment of the Court of Appeal, delivered after full consideration of the merits.

This argument is particularly compelling where the appeal turns on a point on which the trial judge is owed deference. But even on a point of claim construction, the point argued in Phostech [2], the considered opinion a trial judge after a full trial on the merits, must surely count for something. In Laboratoire Pentagone [1968] SCR 307 the SCC ultimately reversed the Quebec Court of Appeal on a point of law; this implies that the Court did not view the the nature of the point on appeal as being relevant to the test for a stay.

Overview of US FTC: The Evolving IP Marketplace

US Federal Trade Commission, "The Evolving IP Marketplace: Aligning Patent Notice and Remedies with Competition,” (March 2011)

I have finally had time to read the most recent IP-related report from the US Federal Trade Commission, on "The Evolving IP Marketplace." In contrast to the 2007 Report on “Antitrust Enforcement and Intellectual Property Rights” which considered the intersection of IP law and competition law, this Report, like the 2003 Report “To Promote Innovation” focuses directly on patent law, on the view that a properly functioning patent system promotes competition, but a defective patent system will do the opposite. This is a trite observation from a patent perspective, and the implicit justification for FTC Reports on patent law is that it has a unique expertise in the economics of competition policy. In my view, that premise is borne out by the latest Report, which very interesting and balanced look at two main areas of patent law: the “notice” function of patents, and patent remedies. (The 2003 Report focused on patent quality, especially obviousness.) The Report is based on hearings and a workshop, as well as written submissions and independent research.

The Report begins with a descriptive survey of "the evolving patent marketplace" (ch 2). This focuses on how ex post licencing can impede innovation. If a firm is able to negotiate for patent rights before it has invested in creating or commercializing the technology, then the licence fee will reflect the value of the patented technology as compared with the non-infringing options available to the firm. However, if the firm licenses only after it has invested substantially in product development, the cost of the licence reflects not just the value of the patented technology, but also the sunk costs that would have to be abandoned if the activity were enjoined. This can impede innovation as a firm that cannot determine at the outset whether its activities will infringe must discount its anticipated profits to allow for the possibility of an ex post infringement action. Ex post licensing is not categorically undesirable, as the possibility of such an action is the major inducement to conduct patent clearance in the first place. However, when the patentee’s strategy is to avoid ex ante licensing in order to extract licence fees that are greater than the value of the technology, the effect is to impede both competition and innovation. I like to refer to “opportunistic ex post licensing” to refer to the latter strategy.

The take-home message is that the ability to conduct effective patent clearance is crucial to a sound patent system. This depends on the efficacy of the notice function of patents; the ability of a firm to predict what activities will infringe by discovering and interpreting relevant patents. The Report finds that patent clearance is generally effective (which is not to say ideal) in industries such as chemicals, pharmaceuticals, and biotechnology, but in other industries such as IT and telecommunications, it is essentially impossible to conduct effective patent clearance [77-78].

The discussion of the importance of patent notice is followed by a very useful description of the role of "patent assertion entities." This is the Report’s preferred term for what are more commonly known as “non-practising entities” or, pejoratively, patent trolls. The Report points out that many entities which do not practice their invention themselves, nonetheless exploit their patent rights in a very traditional manner, as when a start-up that has done the basic break-through research seeks to licence to a larger firm to take the product to commercialization. Patent assertion entities, in contrast, acquire patents to generate revenue through licencing. The Report notes that this may allow small patentee with insufficient resources to sustain an infringement action a way of enforcing their patent rights, but when the patents are asserted opportunistically ex post against an infringer which developed the technology independently, the effect on competition and innovation is likely to be negative.

Most of this discussion is found in Chapter 2 of the Report (pp.50 - 72), which is well worth reading. (About half of the space is taken up with footnotes, so it is not as long as it looks.) Chapter 3 of the Report focuses on specific recommendations as to how to improve patent notice, while chapters 4-8 look at patent remedies. In upcoming posts I will blog on specific points that are of interest from a Canadian perspective.

An Application Deemed Abandoned by Application of Law Cannot be Reinstated

M-Systems Flash Disk Pionerers Ltd v. Commissioner of Patents 2011 FCA 112 affm’g 2010 FC441


This brief decision of the FCA affirms its prior holding in DBC Marine Safety Systems Ltd. v. Canada (Commissioner of Patents), 2008 FCA 256 affm'g 2007 FC 1142, that the Commissioner has no discretion to reinstate an application that has been deemed abandoned by application of law. The only twist is that the applicant in M-Systems had argued that Rule 29, permitting the examiner to require identification of additional prior art raised in a foreign application, is inconsistent with the Act and “unconstitutional” under the s 2(e) of the Canadian Bill of Rights. Both of these last ditch arguments were rejected by de Montigny J at first instance and this was affirmed by the FCA.

International Ex Turpi Causa as a Defence to an Undertaking in Damages

Les Laboratoires Servier & Anor v Apotex Inc & Ors [2011] EWHC 730 (Pat) Arnold J

In the latest decision in the perindopril litigation, Arnold J applied the maxim ex turpi causa non oritur actio in exercising his discretion to decline enforcement of an undertaking in damages given by a patentee who had obtained an interlocutory injunction.1 The issue arose because the product in question was patented in the jurisdiction of manufacture (Canada), but not in the jurisdiction of sale (the UK). It is thus one aspect of the larger problem of territorial limits to patent protection, and ultimately Arnold J’s decision turned on principles of international comity.

Servier obtained a compound patent for perindopril in both Canada and Europe. The European compound patent expired in 2001. The corresponding Canadian patent, which was governed by the old Act, was delayed in conflict proceedings. It was not granted until 2001, and will not expire until 2018. Servier was granted a further European patent for a crystalline form of perindopril in 2004. In 2006 Servier commenced an infringement action against Apotex based on the European crystalline form patent. Servier obtained an interlocutory injunction from Mann J [2006] EWHC 2137 (Pat), subject to the usual undertaking in damages. Servier’s European patent action ultimately failed as the crystalline form patent was declared invalid: [2008] EWCACiv 445 aff’g [2007] EWHC 1538 (Pat).

Apotex sought damages on the undertaking for the loss of UK sales. This was heard in June of 2008 and Norris J held that Servier was liable for £17.5 million: [2008] EWHC 2347 (Ch). Apotex’s loss was calculated on the basis that the perindopril would be manufactured at its facility in Canada and exported to the UK. However, at the same time Servier and Apotex were litigating the compound patent in Canada. On July 2, 2008 Snider J held that the Canadian patent was valid and on June 30, 2009 the FCA affirmed: Laboratoires Servier v. Apotex Inc./ perindopril, 2009 FCA 222 affm'g 2008 FC 825. Thus it became clear that manufacture in Canada of the product which Apotex would have sold in the UK but for the injunction, would have infringed the Canadian patent. Consequently Servier sought and ultimately obtained permission to amend its pleading to raise the defence that Apotex could not claim damages on the undertaking for lost sales when the manufacture of the product would have been illegal: [2010] EWCA 279 (Civ).

Obtaining an NOC is Not Grounds for an Infringement Action

Eli Lilly Canada Inc v Nu-Pharm Inc / olanzapine 2011 FC 255 Snider J

When a generic pharmaceutical company obtains an NOC for a drug, it seems natural to assume that it intend to begin selling that drug, and patentee pharma companies are often anxious to begin infringement proceedings as soon as possible. The courts have been consistently unwilling to allow an action to proceed solely on the basis that the generic has obtained an NOC: AstraZeneca Canada Inc. v Novopharm Ltd. / rosuvastatin, 2009 FC 1209 Hughes J. affm’d 2010 FCA112 Noël JA: Pelletier, Dawson JJA, is the leading case, both for Hughes J’s review of the case law, and because his decision striking the Statement of Claim was affirmed by the FCA. The basic problem for the patentee is that the Federal Court has been unwilling to infer that the generic will enter the market prior to the expiry of the relevant patent, simply from the fact that it has obtained an NOC (see 2009 FC 1209 [14]). A quia timet claim for future infringement will fail for this reason [ibid 23]. A bare assertion that the defendant has manufactured the compound etc. will be disregarded as too speculative to support a claim of current infringement if made without any evidentiary foundation [ibid 18].

Snider J's decision in the olanzapine case confirms and extends this line of cases. In the rosuvastatin case, the generic had not obtained an NOC at all, which added an layer of speculation, particularly as the patentee was seeking an order of prohibition at the same time that it sought to launch an infringement action. In the olanzapine case, Nu-Pharm had obtained an NOC, days after the patent had been declared invalid in infringement proceedings (Eli Lilly Canada Inc. v. Novopharm Ltd. / olanzapine 2009 FC 1018) and before the trial decision invalidating the patent was reversed and remanded (2010 FCA 197). However, Snider J nonetheless held that the Statement of Claim should be struck, as there was no allegation of activity outside of the regulatory safe-harbor of section 55.2(1). Snider J made this holding on the assumption that the preparation of the ANDS and the obtaining of the NOC are in themselves acts of infringement [25], a point which is not yet settled.

Beyond these details, the case affirmed the general point that a patentee cannot launch an infringement action merely because the generic has obtained an NOC: “the pleadings disclose nothing beyond an assertion that Nu-Pharm is positioning itself, through an unnamed third party, to enter the market for olanzapine and, that by doing so, Nu-Pharm will infringe the patent. . . .[T]he Statement of Claim is, at least in part, very much a quia timet proceeding to which the findings of Justice Hughes and the Court of Appeal in AstraZeneca FCA are applicable” [31].

Direct evidence of commercial stockpiling would presumably suffice. But what about the patentee’s basic point that one can reasonably infer an intent to infringe from the fact that the generic has obtained an NOC? (While the question of whether obtaining an NOC is itself an act of infringement is in principle open, I cannot see how getting permission to make or sell is the same as making or selling.) It would be interesting to have statistical evidence on this point. If it turned out that a generic that obtained an NOC only launched during the term of the relevant patent 30% the time, then the view that obtaining an NOC cannot support a quia timet action would seem sound. But if that figure is 95%, the common sense inference would be stronger. Of course, it is not clear whether a court would find statistical evidence relevant to the intent of a particular defendant, and in any event I am not aware of any such study. I’d certainly be curious to find out what those stats are.

Disgorgement of Profits under Section 8 in the Ontario Courts

Apotex Inc. v. Abbott Laboratories, Ltd. / lansoprazole 2010 ONSC 6909, 89 CPR(4th) 141, Whitaker J

Section 8 of the PM(NOC) Regulations provides that if a patentee is unsuccessful in its application for an order of prohibition (as to what is “success” see here), the generic is entitled to compensation for having been kept out of market in consequence of the statutory stay. The generic would obviously prefer that compensation to be measured by the patentee’s profits rather than by its own loss, as the patentee’s profits with market exclusivity will be greater than the profits the generic would have made. However, the FCA has held that an accounting of profits is not available under section: Merck Frosst Canada Ltd v Apotex Inc / alendronate (NOC) 2009 FCA 187 [89] affm’g 2008 FC 1185. This was under an older version of the provision, which provided for “relief by way of damages or profits” (s 8(4)). The same conclusion presumably follows under the current provision, which omits the words “or profits.”

In Apotex v Syntex / naproxen 2005 FC 480 [22], von Finckenstein J said that the NOC Regulations are a “complete code,” which suggests there is no alternative route by which a generic can get disgorgement of the patentee’s profits. However, on appeal the FCA, while repeating that section 8 is “a complete code for the recovery of damages by a second person against a first person,” 2005 FCA 424 [9], at the same time suggested that “while strictly speaking it might be said there is no such tort as negligent breach of a statute, there nevertheless can be a claim in negligence against the Crown and proof of a statutory breach that causes damages may be evidence of such negligence” [10]. This seems to imply that while section 8 is a complete code in respect of losses flowing from the statutory stay as such, if there is some other basis for liability, section 8 may not govern. This leaves open the door to the possibility that a claim for unjust enrichment could allow the generic to claim disgorgement of profits rather than damages. However, it seems to be established that such a claim cannot be made in the Federal Court, as a claim that is not based on the Regulations would not be within the jurisdiction of the court: 2009 FC 693 [8].

In June 2009 Apotex obtained an NOC for apo-lansoprazole, and it commenced an action in the Federal Court for compensation under section 8. Just at that time, the FCA released its the alendronate decision, holding that an accounting is not available under section 8. Apotex discontinued its Federal Court action [28] and decided to try its luck in the Ontario courts, which do of course have jurisdiction over a claim in unjust enrichment. This strategy has cleared the first hurdle. In Apotex Inc. v Abbott Laboratories, Ltd. 2010 ONSC 6909 Abbott moved to strike Apotex’s claim for disgorgement of profits based on unjust enrichment. Whitaker J dismissed the motion, holding that it is not “plain and obvious” that such a claim could not succeed. This seems to me to be the correct conclusion given the stringent test on a motion to strike, but it of course remains to be seen how this claim will fare on the merits.

I suggest that the 2006 amendment of section 8(4) indicates a legislative intent to confine the generic to damages generally – if the legislature intended the generic to be able to recover the patentee’s profits, surely it would have been simplest to allow this to be done under the Regulations themselves, in the Federal Court. However, if the Ontario courts conclude that a successful generic should be entitled to a disgorgement of profits, as a matter of fairness, this argument is unlikely to be conclusive.

The question of whether the successful generic should be entitled to a disgorgement is an interesting one. A prohibition order consequent on PM(NOC) proceeding is analogous to an interlocutory injunction, and section 8 is analogous to the undertaking required of the party who obtains such an injunction: 2008 FC 1185 [54]. Such undertakings do not generally require a disgorgement of profits. I am not aware of any Canadian cases addressing the question of whether it would be appropriate to require an accounting on an undertaking the context of an interlocutory injunction, but the point has been raised in a recent UK patent case. In Wake Forest University Health Sciences v. Smith & Nephew [2009] EWHC 45 (Pat), Lewison J declined to require an undertaking of that form, saying “it is by no means clear to me that it would be just to transfer a profit made by the claimant to the enjoined defendant. If the claimant has made a profit which it would not have made but for the injunction, there may be other people to whom it would be more just that those profits should be returned, either other potential competitors with the defendant or customers who, as things turn out, may have been overcharged” [19]. It will be interesting to see whether the Ontario courts find this reasoning persuasive.

A last general point. While there is an analogy between the NOC proceedings and an interlocutory injunction, one basic distinction is that the PM(NOC) proceedings are entirely separate from any subsequent infringement action. This question of whether section 8 can give rise to a separate cause of action illustrates once again the difficulties arising from a separation of the statutory stay from the underlying cause of action. For illustrations of other problems arising from this same cause, see here and here.

PS - This blog normally comments on recent cases; while this case was released last fall, it has only come to my attention recently, which is why I am commenting on it now.

Latanoprost decision affirmed

Pfizer Canada Inc. v. Pharmascience Inc. / latanoprost (NOC), 2011 FCA 102 Noël JA: Trudel, Mainville JJA affm’g 2009 FC 1294 Heneghan J

The opinion of the FCA affirming Heneghan J’s decision granting an order of prohibition respecting Latanoprost ophthalmic solution is of course of interest to the parties, but there is little in it of general legal interest. This is not surprising, given the cautious style of Heneghan J’s decision. She set out the law by quoting leading cases, reviewed the evidence descriptively, and then set out her conclusions briefly in light of that evidence. While counsel for the appellant did their best to find an appealable point of law, in the end the appeal turned primarily on findings of fact. As there was enough evidence to support her conclusions, the appeal was dismissed.

Interest is very . . . interesting

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

Since I don't have any current cases to blog about, this post reflects on an aspect of one of last year's more interesting decisions. Interest was traditionally not awarded on damages at law, as it was thought to be punitive. A fortiori, compound interest was not permitted. This has been statutorily remedied in each province to the extent of permitting interest to be awarded, both pre- and post-judgment. The Federal Courts Act s 36-37 provides that if a cause of action arises solely in one province (i.e. infringement occurs entirely and only in one province), the laws of that province govern the award of interest, and otherwise the provisions of the Federal Courts Act are applicable. Section 36(2) gives the Court the discretion to award pre-judgment interest “at any rate that the Federal Court of Appeal or the Federal Court considers reasonable in the circumstances.” The Court of Appeal in Wellcome / AZT [2001] 1 FC 495 at [123] has said that “the exercise of discretion in awarding interest "must be related to the task of putting the plaintiff in the same position, so far as money is concerned, as he would have been if he had not suffered the loss.” However, the Federal Court not uncommonly specifies pre-judgment interest at the annual average Bank of Canada bank rate – the rate of interest the Bank of Canada charges on one-day loans to major financial institutions – without consideration of whether this rate would in fact provide full compensation: see Merck & Co., Inc. v. Apotex Inc. 2006 FC 524 [240] affm’d 2006 FCA 323; Laboratoires Servier v. Apotex Inc. 2008 FC 825, [513] affm’d 2009 FCA 222. If the successful plaintiff is not able to borrow at the bank rate, then such an award would arguably not put it in the position it would have been in had it not suffered the loss in the first place.

Another difficulty with the statutory scheme is that many of the Acts, including both the Federal Courts Act, and the Ontario Courts of Justice Act, which is substantially similar, prohibit compound interest pre-judgment. The Federal Courts Act, s 36(4)(b) provides that "[i]nterest shall not be awarded under subsection (1), (b) on interest accruing under this section." (The Onario Act, ss 128(4)(b) is in the same words.) It is clear that an award of simple interest will not provide full compensation to a successful party, particularly when the time between the infringement and judgment is long, or when prevailing interest rates are high.

Slavery and Gene Patents

Harvard College v Canada (Commissioner of Patents), 2002 SCC 76, [2002] 4 SCR 45

Patentable subject matter is a hot topic these days, from Bilski in the USSC, to the reference regarding Programs for Computers G 3/08, in the EPO, to the decision of Phelan J in Amazon.com 2010 FC 1011, which is now on its way to the FCA. Here is a shameless plug: I have three papers on this topic. In the first, I argue that this area of the law has suffered from the conflation of two distinct doctrines: the rule against abstract claims, which prohibits abstract claims in any field of endeavour; and field-specific exclusions, which prohibit patents in a particular field, regardless of whether the claim is abstract or applied. From this distinction I develop a general framework for approaching the issue, and I then apply that framework to argue that Phelan was right for the right reasons. The second paper looks at the history and principles behind the rule against abstract claims. The third is a criticial analysis of the US jurisprudence, in which I argue that the USSC has pretty much gotten it all wrong, and while Canadian law generally is in much better shape, Schlumberger, which followed the USSC, was wrongly decided.

Back to the topic of this post. In Harvard Mouse the majority in the Supreme Court held higher life forms to be unpatentable subject matter. The majority’s view was that a variety of concerns unique to higher life forms meant that patents are not “the appropriate vehicle” for protecting this type of invention [120]. The majority raised a variety of objections, but for the most part these were not particularly powerful, in the sense that even if one accepts their validity, they did not seem to present enough of a problem to warrant a wholesale denial of patents in a productive new field of technology. The majority’s argument was that all these objections cumulatively indicated patenting of higher life forms just doesn’t fit well with the Patent Act. Perhaps this was the majority’s real concern, but my sense is that one argument in particular tilted the balance. This is the “[t]he potential for commodification of human life” [176], which the majority termed “the most significant issue addressed by the [Canadian Biotechnology Advisory Committee]” [175].

The Faint Hope of the Essential Elements Doctrine

Bauer Hockey Corp. v. Easton Sports Canada Inc., 2011 FCA 83 Noël JA: Létourneau, Trudel JJA aff’g 2010 FC 361, 83 CPR(4th) 315 Gauthier J

The decision of the FCA in Bauer v Easton illustrates the deficiencies of the essential elements doctrine in claims construction.1 In principle the doctrine can sometimes rescue a patentee from a poorly drafted patent, but in this case it did not, and in general it is extremely difficult to predict how it will be applied. I suggest that it needs to abandoned entirely, or reinvigorated with a clarified version of the Improver questions, as discussed in my article, “The Essential Elements Doctrine in Patent Infringement" 22 IPJ 223, (draft version here.) As it stands, the doctrine adds complexity and reduces certainty, without offering more than a faint hope to a patentee with imperfect claims.

The doctrine is important when a claim includes an element that is not necessary to the patentability of the disclosed invention. If the element in question is “essential” a competitor can copy the inventive concept without infringing; conversely, if the problematic element is not “essential,” a defendant who copies all of the remaining essential elements will infringe the claim, even though its embodiment does not include the element in question. The dilemma in such cases is that if the court finds the element to be non-essential, it is in effect re-writing the claim by ignoring that element in determining infringement, but if it finds the element to be essential, it is allowing the competitor to freely take an invention that was invented and disclosed by the patentee. There is no easy way out of this dilemma. The Improver questions purported to offer a test, but that approach has not been applied in Canadian cases, despite its endorsement by the Supreme Court in Free World 2000 SCC 66 [55]-[56], and in the UK they have been repudiated by Lord Hoffmann himself as a “mangle” in Kirin-Amgen [2004] UKHL 46 [52].

What is the Promise of a Patent?

GlaxoSmithKline Inc. v Pharmascience Inc. / rosiglitazone (NOC) 2011 FC 239, Hughes J
            1,328,452 / rosiglitazone / AVANDIA

In Canadian law it is standard to say that “[w]here the specification does not promise a specific result, no particular level of utility is required; a ‘mere scintilla’ of utility will suffice. However, where the specification sets out an explicit "promise", utility will be measured against that promise” Eli Lilly Canada / olanzapine 2010 FCA 197 [76]. The notion that the utility is measured by the promise of the patent is now peculiar to Canadian law. It came to us from English law, but it is no longer a consideration in that country: Pharmacia Corp. v Merck & Co. Inc. [2001] EWCA Civ 1610 [54]. While it was raised most commonly in the utility context, it was based on the provision of the earlier Act that a patent might be revoked if “the patent was obtained on a false suggestion or representation” (see Raleigh Cycle v Miller [1948] All ER 308 (HL), 324). Both that provision as a ground of revocation, and the requirement of utility as such, were abolished by the Patents Act, 1977. The doctrine seems never to have been part of US law.

The result of the strict application of the doctrine may be that an inventor with a perfectly good invention will find its patent invalid because the invention’s virtues were exaggerated in the disclosure. This result is rare, as the courts are generally unwilling to read the promise so broadly as to invalidate a patent for an invention that is otherwise good. But that itself creates practical mischief as the validity of the patent may turn on fine points of construction of the disclosure. For example, in Miller the question was whether a “steady” light meant steady enough to provide practical illumination for a cyclists, or 50 Hertz, as had previously, but wrongly, been thought necessary for that purpose, p.325. The validity of the patent turned on this point, though word “steady” did not appear at all in the claims.

GlaxoSmithKline / rosiglitazone (NOC) 2011 FC 239 illustrates the problems with the false promise doctrine. The argument rested on the standard Canadian premise that validity turns on “utility as promised in the patent” [97]. The crucial question was whether the patent promised that rosiglitazone “will be useful,” or simply that it “was expected to be useful” [107]. As Hughes J rightly remarked, this debate is “splitting hairs” [107]. Yet the hair splitting was important; at the relevant date the patentee had established only that the compound would be potentially useful. If it had promised more, then the patent would be invalid on the false promise doctrine, even though potential utility, in Hughes J’s holding, was otherwise enough to satisfy the utility requirement. It is disturbing that patent validity should turn on this technical distinction. The real question, surely, should be whether the degree of utility established was sufficient to warrant a patent. This question is difficult enough without adding a further subjective inquiry as to what the patentee promised in the specification.

In his decision, Hughes J avoided the application of the doctrine by the usual method of interpreting the promise of the patent modestly. He held that “improved” meant better than nothing (a control), rather than better that prior art compounds; and that the promise was only that the compound has potential for use in treating diabetes, not that it would treat diabetes [94c]. In the same vein, but of more general interest, he held [94] that the word “surprising” was “self-serving and of little value one way or another in determining what is the real nature of the invention.” In effect, it is mere puffery. This is an important practical holding, given the routine use of this term, though it reinforces the broader point that the promise of the patent will not be construed strictly.

It is also significant that it is construction of the disclosure, not the claims, that are at issue. The role of the claims is to define the scope of the monopoly, and it is reasonable that its construction may be contentious, though even there the courts have cautioned against “meticulous verbal analysis” Catnic [1982] RPC 183, 243. It is perhaps not so reasonable to import the same degree of scrutiny into the construction of the specification itself; the role of the disclosure is to inform the reader about the invention, not to define the scope of the monopoly, so fine distinctions as to the meaning of particular words should not be crucial. As Hughes J pointed out in GlaxoSmithKline / rosiglitazone (NOC) 2011 FC 239 [83], “[t]here has been considerable jurisprudence as to reading a claim, which is part of the overall specification of a patent, but less jurisprudence as to how to read the description; particularly the “promise” of a patent.” Rather than developing a new body of jurisprudence on this point, perhaps it would be better to abandon the false promise doctrine entirely.

The Vanishing Distinction between Sound Prediction and Demonstrated Utility

GlaxoSmithKline Inc. v. Pharmascience Inc. / rosiglitazone (NOC) 2011 FC 239, Hughes J

The distinction between demonstrated utility and utility based on sound prediction is important, because in the latter case, but not the former, the data supporting utility must be disclosed in the patent itself. I suggested in an earlier post that the distinction is beginning to collapse, as the threshold for what must be disclosed is lowered: in Pfizer / sildenafil (NOC) 2010 FCA 242 the Court of Appeal indicated that it is enough to advert to the data, rather than specifically desribing it. In GlaxoSmithKline / rosiglitazone (NOC) we see the distinction collapsing along a different dimension, as Hughes J held that showing that rosiglitazone was of “potential use” in the treatment of hypoglycaemia was sufficient to establish demonstrated utility [95], [98], [117]. But how different is demonstrating “potential use” from demonstrating a “sound prediction” of use? If we take seriously the distinction between these concepts, then it follows that an inventor who establishes a sound prediction of potential use has therefore satisfied the utility requirement. This seems unreasonable.

As noted, the practical significance of the distinction is whether the data supporting utility must be disclosed in the patent itself. In GlaxoSmithKline / rosiglitazone (NOC), data supporting the utility for rosiglitazone was not disclosed in the patent, so it would have been invalid had utility been based on sound prediction. It is difficult to avoid the conclusion that Hughes J held that “potential use” amounted to demonstrated utility in order to avoid having to hold the patent invalid on this basis. Such contortions do the law no service. In my earlier post I argued that there is no basis in the Act or in policy for drawing this distinction. We now see that it is collapsing on two doctrinal fronts. The key problem is that view that the data supporting utility must be disclosed in the patent itself. It is time to simply recognize that this doctrine, though recent, is wrong. It must be explicitly rejected before the technical distinctions it has engendered become further entrenched in the law.

Primary Screen Establishes Demonstrated Utility

GlaxoSmithKline Inc. v. Pharmascience Inc. / rosiglitazone (NOC) 2011 FC 239 Hughes J

The question of exactly how much utility is necessary to satisfy the utility requirement is a crucial, particularly for pharmaceutical patents. It is well-established that “an inventor is not required to meet regulatory testing standards in order to demonstrate utility”: Pfizer v. Novopharm / sildenafil (NOC) 2010 FCA 242 [97]. It is also reasonably clear that human testing is not required to established utility based on sound prediction: Merck / lovastatin 2010 FC 1265 [510]. In GlaxoSmithKline / rosiglitazone (NOC) Hughes J went further and held [117] that the “primary screen,” described [115] as “the first test that you would, do to look for efficacy [and] the basis on which our department would progress or wish to progress a compound further,” is sufficient to establish demonstrated utility.

The claim in question was to rosiglitazone, an anti-diabetic drug in the thiazolidinedione class of drugs. The primary screen in question was a single murine oral glucose tolerance test, run at only a single dosage level [99-101]. The holding was expressly not based on sound prediction. GSK had not run a sound prediction argument at all [77]; this may have been because the test results on rosiglitazone were not disclosed in the patent itself, as they had reached the patent department too late to be included [32j], and so GSK anticipated trouble with requirement that the factual basis for sound prediction be disclosed. (A similar primary screen on a different compound was the only test data in the patent itself.)

A caveat is that this holding was premised on the particular promise of the patent, which was interpreted [98] as promising only that the claimed compounds were better than nothing (ie a control), and that they were of potential use in treating hypoglycaemia. A patent which promised more might require a correspondingly greater demonstration of utility. (I will discuss problems raised by the focus on the promise of the patent in a subsequent post.) Also, in principle it might be that a different primary screen, or different results, would not satisfy the requirement. Nonetheless, this decision does establish a low threshold for demonstrated utility in pharmaceutical patents. This is consistent with the “scintilla of utility” standard that is generally applicable when the patent itself does not establish a higher threshold: Pfizer v. Novopharm / sildenafil (NOC) 2010 FCA 242 [94].

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.

Accounting and Injunction Granted: No News is News

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

I noted in a recent post that Snider J, in her lovastatin decision 2010 FC 1265, departed from the common practice of allowing a successful patentee an election between an accounting and damages. What was noteworthy about Snider J’s decision was not simply that the patentee was confined to damages, but that Snider J expressed a presumption against allowing an election, on the basis that “[i]t is necessary for a party seeking an equitable remedy, such as profits, to show some basis for the exercise of equity” [617].

This may be contrasted with Gauthier J’s decision in Valence Technology. The defendants had argued that an accounting should be denied because of undue delay and bad faith. Gauthier J dismissed both of these arguments on the facts, and allowed Valence to elect [234]-[238]. What is significant, is that while Gauthier J expressly recognized the discretionary nature of an accounting, she did not place any special burden on a plaintiff seeking an election. While her reasons on this point were brief, the tenor is clearly that the plaintiff will be allowed an election unless there is some particular reason to refuse it. This contrasts with the view expressed by Snider J that an accounting will only be permitted if there is some particular reason to allow it. In this respect, Gauthier J’s decision reaffirms the orthodox practice.

Gauthier J also granted injunctive relief [239]-[240]. This is the invariable practice and would hardly be worth mentioning, save for the question of whether the US Supreme Court decision in eBay Inc v MercExchange, LLC, 547 U.S. 388 (2006) will make its impact felt in Canada. In Valence Technology, the defendant had asked the Court to give it a grace period of approximately two years before giving effect to the injunction, in order to give it time to finish a new factory that was designed to use a non-infringing process. The defendant in this case is relatively sympathetic, in that it was clear on the facts that it had developed the infringing process independently. Of course, independent creation is not a substantive defence, but given that injunctive relief is equitable, in principle independent creation might be a relevant consideration. On the other hand, the patentee in this case, who had developed and was practising the invention itself, is also much more sympathetic than the plaintiff in MercExchange. It is interesting, but not surprising, that we will have to wait for a stronger set of facts before the possibility of refusing final injunctive relief to a successful patentee becomes a real issue.

Caution Regarding Inequitable Conduct

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

Inequitable conduct in patent prosecution poses a thorny problem. On one hand, the practice of willfully misleading the patent office during prosecution in order to obtain a patent that would not have been granted must be discouraged. On the other hand, introducing an intent element into the determination of patent validity introduces uncertainty and expense to the litigation, and the sanction of invalidity is a severe punishment for bad faith in cases where the misinformation is substantively inconsequential. The US has been wrestling with this problem for years, and an en banc decision from the Federal Circuit in Therasense, Inc v Becton, Dickinson and Co is in the offing.

In contrast, Canadian courts have historically been reluctant to invalidate patents on this basis. Recently, however, Hughes J has been seeking to give life to this ground of attack, on the basis of both the older section 53(1) and the new section 73(1)(a). In GD Searle & Co v Novopharm Ltd / celecoxib (NOC) 2007 FC 81, Hughes J held a patent to be invalid on the basis of section 73. While he was reversed, without comment on this point, 2007 FCA 173, Malone JA: Noël, Sexton JJA, his decision was picked up in Mactavish J’s controversial decision in Lundbeck Canada Inc v Ratiopharm Inc / memantine (NOC), 2009 FC 1102. In Ratiopharm Inc. v Pfizer Ltd. / amlodipine besylate, 2009 FC 711, [195]-[204], Hughes J held a patent to be invalid on the basis of section 53(1). This was affirmed on other grounds 2010 FCA 204.

In Valence Technology, Inc v Phostech Lithium Inc 2011 FC 174, Gauthier J indirectly cast doubt on Hughes J’s decision in Ratiopharm v Pfizer respecting section 53. She stated [184] that “[i]t is important to mention that the comments of Justice Roger Hughes in Ratiopharm Inc. v Pfizer Ltd., 2009 FC 711, in respect of subsection 27(3) (as well as those relating to ss. 53(1)) were described by the Federal Court of Appeal as simple ‘obiter’ (2010 FCA 204 at para 2).” She then went on to distinguish Hughes J’s decision on the facts, saying she was satisfied that the case before her was substantially different, “regardless of the intrinsic value of the comments made by Justice Hughes on the law” [200].

It is certainly true that the two decisions can be easily distinguished on the facts. Phostech’s misconduct argument was curious and unique. It argued that Valence’s misconduct lay in copying the wording of Phostech’s subsequent patent application in the divisional to Valence’s prior application. Gauthier J explained that there is simply nothing wrong with this: “there is no copyright on claim language” [211]. That the cases are so readily distinguishable on the facts gives added significance to Gauthier J’s subtle remarks regarding Hughes J’s analysis.

It may be reading too much into a couple of phrases, and we certainly cannot draw any firm conclusions as to Gauthier J’s own views regarding inequitable conduct, but Valence Technology suggests that Gauthier J, for one, will be cautious before following the path that Hughes J seeks to blaze.

Claim Construction and Validity

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

In Valence Technology Gauthier J remarked at [138] that “the Court must construe the claim without regard to its validity.” I suggest that this is not correct. The Supreme Court has said that “the guiding principle” of purposive construction is that “where the language of the specification, upon a reasonable view of it, can be so read as to afford the inventor protection for that which he has actually in good faith invented, the court, as a rule, will endeavour to give effect to that construction."1 Many other statements of high authority, ancient and modern, are to the same effect: a patent should be approached "with a judicial anxiety to support a really useful invention"2; “such construction ought to be made as will, consistently with the fair import of the language used, make the claim of invention co-extensive with the new discovery of the grantee of the patent”3;“it is the widest purpose consistent with [the patentee’s] teaching which should be used for purposive construction."4

Thus the true rule is that the claims should be construed with a view to validly claiming that which the inventor has invented and disclosed. This follows from the general rule that legal documents, from legislation, to patents, to contracts, are to be of construed in light of the drafter’s purpose. The skilled reader does not just understand the technical terms that are used in the patent; she also understands the technical advance made by the patentee, and she understands that the patentee intends to claim that advance. For a more extended discussion, see my recent article, “The Essential Elements Doctrine in Patent Infringement: Free World and Whirlpool in Light of Kirin-Amgen” 22 IPJ 223 - 251 (2010).

With that said, I have been unfair to Gauthier J in taking her statement out of context. Phostech was arguing for a construction that would have rendered the claim invalid, and in saying that the Court must construe the claim “without regard to its validity,” Gauthier J was saying in effect that the Court should not go out of its way to construe the claim in a manner that will result in invalidity. This is entirely consistent with the authorities cited above.

Footnotes are after the break.

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.

Valence Tech v Phostech Lithium Overview

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

Gauthier J’s decision in Valence Technology, Inc. v. Phostech Lithium turned almost entirely on the facts, though some interesting legal points were raised tangentially. This post provides an overview. I will discuss the legal issues in separate posts.

The invention in question related to a process for making lithium mixed metal cathodes for lithium ion batteries. It was known in the prior art that LiFePO₄ is a good cathode material [24], but it had not been commercially adopted, apparently because of the cost of production. Both the plaintiff, Valence, and the defendant Phostech, had developed new processes for making LiFePO₄ cathodes at about the same time. The key to Valence’s process was the use of carbothermal reduction (CTR). Valence held three process patents on its technology: 2,395,115 and 2,466,366, which was a divisional of ‘115, and the subsequent 2,483,918 patent which was intended to claim an extension of the technology to a wider set of compounds.

Challenges to the validity of the ‘115 patent were abandoned in oral argument [180], and Gauthier J held that Phostech’s process infringed the ‘115 patent [178]. While Phostech did raise some claim construction arguments, these were not particularly strong, in my view. While Gauthier J noted [139] that "as a whole the claims are not particularly well written,” she had no real difficulty in coming to a conclusion which favoured Valence. The difficult question was whether the Phostech process used carbothermal reduction or some other reductive process. This was a difficult question on the facts. While there were disputes in discovery, the real difficulty was more fundamental. It was established that the compounds used in the Phostech process could support CTR under the right conditions [158], but it was difficult, as a matter of science, to determine whether the conditions inside the closed industrial kiln used by Phostech would actually result in carbothermal reduction. A variety of tests were conducted by both parties, and ultimately Gauthier J held that Valence had established on the balance of probabilities that the Phostech process used CTR [166]. While Valence’s expert witness on this point was particularly good, and Phostech’s expert was particularly weak [49, 166], Gauthier J carefully reviewed the evidence and from the decision itself there is no reason to believe that the inexperience of Phostech’s expert influenced the outcome. Gauthier J did note that "what surprises me most is the fact that Phostech’s expert did not perform tests that more closely mirror the actual timing and temperatures used in its P1 Process” [168]. Read in context this does not amount to shifting the burden to the defendant, as the plaintiffs had conducted enough tests to support Gauthier J’s conclusion. It does make the basic point that once the plaintiff has advanced enough evidence to support its case on the balance of probabilities, the defendant needs to respond with solid evidence in order to tilt the balance back in the other direction.

Gauthier J made no determination as to infringement of the ‘366 and ‘918 patents, but she did hold that the ‘918 patent was invalid as being anticipated by Canadian Patent Application 2,423,129, which had been published prior to the ‘918 priority date (but after the ‘115 priority date). She had no difficulty in coming to this conclusion. The root of the problem was that the ‘918 patent claimed too broadly. The advance in the ‘918 patent was an extension of the CTR technology to a wider set of compounds, but as drafted it included all the compounds described in the ‘115 patent, and also LiFePO₄ which was described in the an example of the ‘129 application [230], and construction was not disputed [151]. (Obviousness of the ‘918 patent over the ‘129 application was not discussed, presumably because the application, while prior art, was not part of the cgk [149].) As all claims of the ‘918 patent were invalid, the patent as a whole was declared to be void.

An insufficiency attack on the ‘366 patent was readily dismissed on the facts [182ff].

In the result, Gauthier J held that ‘115 patent was infringed, and that the ‘918 patent was void.