Infringement if Later ≠ Anticipation if Earlier

Bristol-Myers Squibb Co. v. Mylan / efavirenz (NOC) 2012 FC 1142 Barnes J

            2,101,572 – 2,279,198 – efavirenz – SUSTIVA

The traditional rule is that “what would infringe if later, anticipates if earlier”: Abbott Labs v Ratiopharm / clarithromycin (NOC) 2006 FCA 187 [25]; Lightning Fastener Co. v. Colonial Fastener Co., [1933] SCR 377 at 381. This is no longer true, since Sanofi 2008 SCC 61, following Synthon [2005] UKHL 59, held that anticipation requires enabling disclosure. This adage applies only to the disclosure prong of anticipation: Synthon [24]. If the prior use did not disclose the information necessary to enable the invention, it will not anticipate. It will still infringe if practiced later, since infringement does not require knowledge: Merrell Dow v HN Norton [1995] UKHL 14 [47]; Abbott / clarithromycin (NOC) [24]. The consequences is that if the prior use was not enabling, a later patent could confer a right to stop people from doing what they had done before. This is strikingly counter-intuitive: “Ever since the power of the Crown to grant monopolies was curbed by parliament and the courts at the beginning of the seventeenth century, it has been a fundamental principle of United Kingdom patent law that the Crown could not grant a patent which would enable the patentee to stop another trader from doing what he had done before”: Merrell Dow v HN Norton [17]. Nonetheless, that is the direct implication of the rule that anticipation requires enabling disclosure. So far the leading cases Canadian and UK cases have avoided this result on the facts, as in Merrell Dow, but this is not a satisfactory response. (US law has addressed the problem directly with the doctrine of inherent anticipation: “a prior art reference may anticipate without disclosing a feature of the claimed invention if that missing characteristic is necessarily present, or inherent, in the single anticipating reference”Schering Corp v Geneva Pharmaceuticals 339 F.3d 1373, 1377 (Fed Cir 2003).) The problem will arise one day in a context in which it cannot be avoided, and the courts will face a choice between preventing a person from doing what she has been done before, and adhering strictly to the requirement of enabling disclosure.

Use Claims and Choice in Construction of the Promise

Bristol-Myers Squibb Co v Mylan / efavirenz (NOC) 2012 FC 1142 Barnes J

            2,101,572 – 2,279,198 – efavirenz – SUSTIVA

Efavirenz is an anti-retroviral drug used to treat HIV infection, typically in combination with other anti-retroviral agents. Two patents related to efavirenz were at issue in this case: the ‘572 patent, expiring in July 2013,which claimed efavirenz; and the ‘198 patent, expiring in 2018, which claims a particular crystalline form of efavirenz (Form I) and a process for producing it. BMS was successful in obtaining an order of prohibition in respect of the ‘572 patent, but not in respect of the ‘198 patent. This post will focus on the ‘572 patent. The interesting question of how to construe the promise of the patent in the context of a use claim, where the utility is specified in the patent itself, was raised but avoided. The most interesting statement in the decision hints in dicta at a return to the older view that “. . it is sufficient utility to support a patent that the invention . . . affords the public a useful choice.”

Issues for the SCC in Olanzapine Decision?

Eli Lilly Canada Inc v Novopharm Ltd / olanzapine (No 2) 2012 FCA 232 Nadon JA: Sharlow, Trudel JJA aff’g 2011 FC 1288 O'Reilly J

2,041,113 – olanzapine – ZYPREXA

In Eli Lilly Canada Inc. v. Novopharm Ltd. / olanzapine (No 1) 2009 FC 1018 O’Reilly J held Lilly’s olanzapine patent, 2,041,113, to be an invalid selection patent over the genus patent 1,075,687. On the appeal, the FCA held that invalid selection is not an independent basis upon which to attack the validity of a patent and that O’Reilly J’s finding of invalidity was fatally tainted by this error: 2010 FCA 197. The FCA held that the patent was neither anticipated nor obvious, nor was it invalid for double patenting, but it remanded the case to O’Reilly J on the issues of utility and sufficiency. On remand in Lilly v Novopharm / olanzapine (No 2) 2011 FC 1288, O'Reilly J held that the disclosure was sufficient, but the patent was invalid for lack of utility. In a brief decision from the bench the FCA has affirmed this decision: “we have not been persuaded that the judgment under appeal is based on any error of law or principle or any palpable and overriding error of fact” [1].

This brevity of this FCA decision is both unfortunate and understandable. It is unfortunate because O’Reilly J’s decision directly raises two important issues of pharmaceutical patent law. It is understandable because the legal issues are relatively settled at the FCA level.

The first issue relates to the promise of the patent doctrine, which holds that “where the specification sets out an explicit ‘promise’, utility will be measured against that promise” Lilly v Novopharm / olanzapine (No 1) 2010 FCA 197 [76]. If the promised utility is greater than that which is necessary to support a patent, utility will be measured against that promise, with the result that a patent for an invention which has sufficient utility to support a patent may nonetheless be invalid for lack of utility. This appears to be exactly the what happened in this case, as explained in this post on O’Reilly J’s decision. Nonetheless, this doctrine is now firmly established in the Federal Court jurisprudence: in Lilly v Novopharm / olanzapine (No 1) the FCA went so far as to say that “[t]he promise of the patent is fundamental to the utility analysis” 2010 FCA 197 [93]. The real battleground now is how exactly to construe the promise of the patent in a given case. In Lilly v Novopharm / olanzapine (No 1) the FCA gave a very strong hint to O’Reilly J as to how it thought that the promise should be construed and on remand he took the hint and construed the patent as suggested by the FCA. It is therefore not surprising that the FCA should be unwilling to review either the doctrine or the construction of the promise in this case.

From this it seems clear that the promise of the patent doctrine is here to stay, at least until it gets taken to the SCC. In my view, the doctrine is fundamentally unsound, and the SCC should grant leave sooner rather than later. After often being critical of the doctrine in this blog, I decided to explore the issue in a full article, which I am just finalizing. In that article I show that the doctrine was originally premised on the fact that the grant of a patent was a discretionary exercise of the Crown prerogative, so the mere fact that an invention had sufficient utility to support a patent did not guarantee that the Crown would actually choose to grant a patent. In measuring utility by the promise of the patent, the courts were refusing to second guess the Crown as to whether the patent should have been granted. Now that the grant of a patent has shifted from a matter of discretion to a statutory right, the basis for the doctrine no longer exists. Indeed the doctrine is inconsistent with the fac that the Commissioner of Patents has “nodiscretion to refuse a patent . . . if the statutory criteria are met” Harvard Mouse 2002 SCC 76 [11] (Binnie J), dissenting), [119] accord (Bastarache J). I will be on a panel “Current Issues in Construction of a Patent,” at the upcoming IPIC AGM which will discuss this doctrine, and I expect to have a draft of my article available before then.

O’Relly J’s decision in Lilly v Novopharm / olanzapine (No 2) also raises a second important issue related to selection patents. The IG Farbenindustrie rules for selection patents which were adopted by the SCC in Sanofi 2008 SCC 61 as being “well accepted” [11] have since been repudiated by the EWCA as being unsound in principle. In Dr Reddy’s Laboratories v Eli Lilly / olanzapine [2009] EWCA Civ 1362, [2010] RPC 9 [39] Jacob LJ noted that

If one thinks about [the IG rules] it is difficult to see how, realistically, they could be complied with unless the patentee carried out an enormous range of experiments. How can you show your class (or compound) has a “substantial advantage” over the prior class without experimenting with at least quite a lot of the class – enough to make a sound prediction at the very least? Or how can you show that the quality which makes your selected class is peculiar to that class? If you put in your thumb and pull out a plum, how are you to say that there are no other plums in the pudding?

As I noted in a previous post on the FC decision, O’Reilly J invalidated the olanzapine patent exactly for failure to conduct enough experiments to show that olanzapine had a substantial advantage over the prior class. That is, his decision turned on precisely an application of the test which caused the EWCA to reject the IG Farbenindustrie rules as unsound. Nonetheless, in light of the four-year old decision inSanofi approving those rules, it is understandable that the FCA would not choose to revisit them. Again, it seems that if the doctrine is to be addressed, it will have to be done by the SCC.

No New Cases for Week of 9 September

No new cases were posted on the Federal Courts' website for the week of 9 September.

No New Cases for Week of 2 September

No new patent / NOC / data protection cases were posted on the Federal Courts' website for the week of 2 September.

No New Cases for Week of 26 August

No new patent / NOC / data protection cases were posted on the Federal Courts' website for the week of 26 August.

No New Cases for Week of 19 August

No new patent / NOC / data protection cases were posted on the Federal Courts' website for the week of 19 August.

Costs in Eurocopter v Bell

The only patent case posted for the week of 12 August was the costs decision in Eurocopter v Bell 2012 FC 842. While I won’t comment in detail, Martineau J’s decision was interesting in several respects. He indicated at [22] that the costs award in a “lengthy and hard-fought” patent case should normally be assessed at the upper end of column IV of Tariff B. His discussion of what constitutes success and how to assess costs in when success is divided was also interesting. Eurocopter was successful in respect of the Legacy landing gear, of which only a small number were made by Bell, but Bell was successful in respect of the Production landing gear, which, as the name reflects, was put into production. Martineau J concluded that overall, Eurocopter was the most successful party, but while he assessed Eurocopter’s costs at the upper end of column IV, he reduced the costs award by 50% to reflect “Bell’s indisputable partial success in defending its Production gear and Eurocopter’s choice to pursue an action against the Production gear in which it was ultimately unsuccessful” [23].

No New Cases for the Week of 5 August

No new patent / NOC / data protection cases were posted on the Federal Courts' website for the week of 5 August.

Speculative Prejudice to Third Parties in Reinstating a Patent

Repligen Corporation v. Canada (Attorney General) 2012 FC 931 Near J

Repligen’s former patent agent transposed two digits of Repligen’s patent 1,341,486, to 1,314,486, when it engaged Computer Patent Annuities to pay maintenance fees on the patent. Consequently, the fees were paid against the “14" patent, which was held by Rolls-Royce. Sometimes the fees would be paid first on behalf of Rolls-Royce, sometimes on behalf of Repligen. The second payor would to be told that fees had already been paid and would request a refund. While duplicate fees were paid on the "14" patent, no fees were paid on Repligen’s “41" patent and CIPO sent a Maintenance Fee Notice to Repligen’s former agent advising that the patent would lapse unless payment was made within twelve months. Repligen’s former agent did not respond [5], and the “41" patent lapsed.

Repligen then switched agents. Its new agent attempted to have the patent reinstated, arguing that the Commission should exercise her discretion to correct the clerical error under s 8 of the Act and reinstate the patent. The Commissioner refused, primarily on the basis of the lengthy delay and the potential for prejudice to third parties who might have relied on the register showing the patent as lapsed [#1 59].

In Repligen #1 2010 FC 1288 Lemieux J held that the Commissioner had not properly exercised her discretion. A crucial point was that the Commissioner’s concern regarding prejudice to third parties was speculative as she had no evidence of third party prejudice. Lemieux J contrasted this with Bristol-Meyers (1998), 82 C.P.R. (3d) 192 (FCA) in which two other companies had filed priority claims for similar drugs [#1 60(f)]. Lemieux J noted the “catastrophic consequences” of the loss of patent rights [#1 59], and insisted that the Commissioner take into account the impact on Repligen in deciding whether the patent should be reinstated [#1 60(a)].

I am inclined to think that the Commissioner was right on this point. There may be many cases in which a third party would have relied on the lapse of the patent in a way that could not come to the attention of the Commissioner. For example a third party might have done patent clearance search before deciding to invest in developing a new product and then proceeded after having determined that its product would infringe the Repligen patent, but that the patent had lapsed. Given the nature of third party rights, it seems likely that it would be only in relatively unusual circumstances, such as those in Bristol-Meyers, that the Commissioner could become aware of the prejudice to third parties. It is true that the consequences to Repligen of the loss of its patent rights can be catastrophic, but it is also true that infringement of those rights could be catastrophic to a third party.

In any event, this was not the view of Lemieux J, who remitted the matter to be reconsidered by a different official in the Patent Office. The Commissioner once again refused to correct the error, and Repligen once again sought judicial review, leading to this decision in Repligen #2. This time the Commissioner focused on potential prejudice to Rolls-Royce. The Commissioner argued that “‘[c]orrecting Repligen's error today could retroactively have the effect of causing the Rolls-Royce patent to have expired in 2008' since the payments originally applied to it would automatically turn over to the Repligen Patent” [# 2 16]. Near J rejected this argument, rightly in my view. Fees were always paid in respect of Rolls-Royce’s patent, which never lapsed and has now expired [# 2 31]. I see this argument by the Commissioner as a way of attempting to point to an actual prejudice rather than a speculative prejudice in order to satisfy the direction by Lemieux J. It is an unsatisfactory attempt, as the Commissioner identified the real issue correctly in the first instance; the real question is whether the Commissioner should consider harm to third parties who may have relied on the lapse, unbeknownst to the Commissioner. Lemieux J, and now Near J, have held that it should not.

The matter had been remitted to the Patent Office once again. Even if the patent is reinstated, I am not sure Repligen’s troubles are over. Loss of patent rights is not “catastrophic” if those rights are never exercised. But if Repligen has the patent reinstated and then brings an infringement action against a competitor who can show that it did in fact rely on the lapsed patent, there is a a very strong argument that that defendant should have some kind of equitable defence. If the defendant can say “I searched for patents before undertaking my business, I found this patent that I would have infringed, I determined that it had lapsed, and I then invested $10 million in reliance on that,” it would be a serious failure of the patent system to allow Repligen to enforce against that defendant.

Bifurcation Refused When Patentee Gave up Right to Damages

Apotex Inc. v. H. Lundbeck A/S / escitalopram 2012 FC 414 Tabib P

I don’t usually comment on procedural issues but this decision, in which Lundbeck successfully opposed Apotex’s motion to bifurcate by giving up its right to damages, provides a clear explanation of the rationale for bifurcation and raises some fundamental questions of principle.

What Is the Difference Between Dosage Form and a Device?

Novartis Pharmaceuticals Canada Inc v Canada (Attorney General) 2012 FC 836 Martineau J

Pat No. 2,304,819; Tobi Podhaler®

My previous post discussed the product specificity aspect of this decision. An interesting point is also raised in respect of para 4(2)(c), which allows listing if the patent contains a claim for the dosage form. According to the RIAS to the 2006 amendments introducing the new listing requirements, a claim for a dosage form

must contain a claim that includes within its scope the approved medicinal ingredient. This latter requirement is meant to ensure that a patent directed solely to a device, such as an intravenous stand or a syringe, does not meet the definition of "dosage form" and remains ineligible for listing.

The ‘819 patent does claim a medicinal ingredient in generic terms such as “bioactive agent” and “antibiotic,” and presumably the product specificity requirement would have been satisfied if it had explicitly listed tobramycin. But even apart from the requirement of product specificity, there is still the question of whether the ‘819 patent claims a dosage form. To my mind, the perforated microparticles of the ‘819 patent are somewhere near the boundary of a dosage form and a device. Martineau J addressed this by saying:

[64] There is no doubt that the approved dosage form of Tobi Podhaler is more complex and more nuanced than an intravenous stand or a syringe. However, the rationale remains the same because the delivery system on the grounds of which the applicant seeks to list the ‘819 patent, including its different components, is one that can be used in association with a broad range of medicinal ingredients and is therefore insufficient to help the ‘819 patent qualify under paragraph 4(2)(c) of the Regulations.

This indicates that a broadly applicable delivery vehicle cannot be listed, even if it specifically refers to medical ingredients. This is a reasonable interpretation of the provision. Presumably the intent of the Regulations is that a patent for a new syringe could not be listed, even if it was claimed “for the purpose of delivering a bioactive agent.” But on the other hand, the RIAS explains that para 4(2)(c) was included because

the Government has come to the view that inventions in this area merit the special protection of the PM(NOC) Regulations. This is particularly true where biologic drugs are concerned, as effective administration of the medicinal ingredient is often dependent on the development of new and innovative delivery mechanisms.

If new and innovative delivery mechanisms are worthy of protection under the Regulations, why is a new and innovative delivery mechanisms excluded from listing simply because it can be used with a wide range of drugs? Arguably a delivery system that can be widely used is even more deserving of protection that one that is tailored to a particular drug. Perhaps the objection is that it would be wrong to allow a patent for a new delivery system to trigger the statutory stay for every new drug, simply because the drug could be delivered by that delivery system. This is a fair point, but it seems to me that it could be accommodated by a requirement that the delivery system would certainly or almost certainly be used (and so infringed) in order to be listed against a particular product. It must also be acknowledged that simply because the NOC Regulations exist, does not mean that they should apply to every type of patent, even if it is one that would necessarily be infringed, as the patent holder can always turn to an infringement action. But these kinds of questions make it difficult to see what general principle underlies the listing requirements.

Product Specificity Requires Explicit Naming of Medicinal Ingredient

Novartis Pharmaceuticals Canada Inc v Canada (Attorney General) 2012 FC 836 Martineau J

Pat No. 2,304,819; Tobi Podhaler®

Martineau J’s decision refusing to allow Novartis’ ‘819 to list its patent against its Tobi Podhaler® product follows and applies the existing case law that interprets the principle of product specificity as requiring that a patent explicitly name the medicinal ingredient in the claims in order to be eligible for listing against a drug product. While this case illustrates once again some of the conceptual peculiarities of this approach to the product specificity requirement, it does not change the law in this respect. The decision does raises some interesting questions as to the boundary between a device such as a syringe which does not qualify as a dosage form at all, and once which might quality if it otherwise meets the product specificity requirements, which will be discussed in a subsequent post.

Promise of the Patent Is to Be Found in the Claims

Fournier Pharma Inc. v. Sandoz Canada Inc. 2012 FC 741 Zinn J
            NOC; fenofibrate; LIPIDIL EZ; 2,372,576

Zinn J’s Fournier / fenofibrate (NOC) decision turned primarily on claim construction and infringement, but hidden in the brief treatment of validity of the ‘576 patent there is a very important passage regarding the promise of the patent which deserves to be quoted in full (Zinn J’s emphasis):

[126] The Federal Court of Appeal in Eli Lilly Canada Inc v Novopharm Limited, 2010 FCA 197, citing Consolboard Inc v MacMillan Bloedel (Sask)Ltd, [1981] 1 SCR 504, stated at para 76 that “where the specification sets out an explicit ‘promise’, utility will be measured against that promise [emphasis added].” The promise of a patent, as that term is used in patent law, is nothing more than the utility the inventor claims for his invention. Where that promise – that claimed utility – is clearly and unequivocally expressed by the inventor in the claims of the patent, then that expression ought to be viewed as the promise of the patent. Any statement found elsewhere should be presumed to be a mere statement of advantage unless the inventor clearly and unequivocally states that it is part of the promised utility. The following from page 1 of the patent in AstraZeneca Canada Incv Apotex Inc, 2010 FC 714, is illustrative of such a statement found in the disclosure:

It is desirable to obtain compounds with improved pharmacokinetic and metabolic properties which will give an improved therapeutic profile such as a lower degree of interindividual variation. The present invention provides such compounds, which are novel salts of single enantiomers of omeprazole [emphasis added].

[127] The interpretation should be focused on the claims because an inventor is not obliged to claim a monopoly on everything new, ingenious, and useful disclosed in the specification. If, as here, the claims are certain and unambiguous in stating the promise, then the disclosure should not be examined microscopically to find additional promises that are outside the scope of the inventor’s claimed monopoly.

Consequently, Zinn J concluded at [128] that “I find, as stated in claim 1, that the promise of the patent is a “fenofibrate composition … having a dissolution of at least 10% in 5 minutes, 20% in 10 minutes, 50%in 20 minutes and 75% in 30 minutes” (my emphasis). As I have emphasized, this promise directly reflects the wording of the claim itself.

While Zinn J’s remarks are very clear and he has provided his own emphasis, almost the entire passage could be highlighted, so I will add some of my own:

Where that promise – that claimed utility – is clearly and unequivocally expressed by the inventor in the claims of the patent, then that expression ought to be viewed as the promise of the patent. Any statement found elsewhere should be presumed to be a mere statement of advantage unless the inventor clearly and unequivocally states that it is part of the promised utility. . . 

If, as here, the claims are certain and unambiguous in stating the promise, then the disclosure should not be examined microscopically to find additional promises that are outside the scope of the inventor’s claimed monopoly.

Zinn J’s focus on the claims is in sharp contrast with the trend of the recent Canadian cases, which is to extract the promise of the patent from a searching, sometimes “microscopic,” analysis of the disclosure. This is usually done in an ad hoc manner, though Rennie J in Astrazeneca / anastrozole (NOC) has recently used a more structured approach; but however it is done, the focus is almost always on finding a statement of the promise in the disclosure. One exception which proves the rule was Pfizer v Apotex / latanoprost (NOC) 2011 FCA 236, blogged here, in which the FCA interpreted the promise in light of the common general knowledge, without reference to the disclosure, much less the claims.

While Zinn J’s approach is a departure from recent Canadian trends, it is consistent with the English cases which developed the false promise doctrine. In Alsop’s Patent (1907) 24 RPC 733 at 753 (Ch), one of the leading cases on the promise of the patent, Parker J noted “the importance of drawing a distinction between what the patentee claims to have effected by the invention for which he claims protection [ie the promise of the patent], and a statement of the additional purposes to which the invention can be applied.” That is, not every statement of advantage in the specification is to be treated as a promise. Put another way, in order for validity to turn on a promise made in the specification, the promise must be “material” in the sense that it can be said that the patent was obtained on the strength of the promise: Alsop’s Patent, ibid, Raleigh Cycle Co Ltd v H Miller & Co Ltd, (1948) 65 RPC 141 at 162 (HL). This point seems to have been largely forgotten in recent Canadian case law, in which the disclosure is examined to extract a promise without regard to whether that promise is material. Zinn J’s approach amounts to a presumption that a promise is material only if it is found in the claims. This presumption is consistent with the general rule that the invention is defined by the claims, not by the specification. Consequently, it helps address one of the most problematic aspects of the false promise doctrine, which is that validity of the patent will often turn on a “microscopic” construction of the disclosure. This is a trap particularly when, as is normally the case, the patent was drafted in light of US and European law, which do not have a false promise doctrine.

Notwithstanding the FCA decision in Pfizer v Apotex / latanoprost (NOC), a few recent cases suggest that the FCA has recognized the need to put some bounds on the false promise doctrine by approving relatively moderate constructions of the promise (see here and here). The difficulty with relying on the trial judge to adopt a moderate approach to construction of the promise is that there may be considerable arbitrariness in the result, depending on how aggressive a particular judge chooses to be in construing the promise. The approach of Rennie J in Astrazeneca / anastrozole (NOC) (blogged here) is one attempt to provide a principled legal structure to the construction of the promise, and Zinn J’s approach is another. I prefer Zinn J’s approach for its focus on the claims, as opposed to Rennie J’s approach, in which the focus remains on the disclosure. In any event, it is gratifying to see the Federal Court grapple directly with the legal structure of this problematic doctrine.

Claim Ambiguity and Recourse to the Specification

Fournier Pharma Inc. v. Sandoz Canada Inc. 2012 FC 740, 2012 FC 741 Zinn J

NOC; fenofibrate; LIPIDIL EZ; 2,487,054 (2012 FC 740); 2,372,576 (2012 FC 741)

The separate decisions in Fournier / fenofibrate (NOC) concern the same drug but two different patents. In both cases Fournier failed to obtain an order of prohibition against Sandoz because it failed to established that Sandoz’ product would infringe. Both patents had a particle size limitation. The particle size of Sandoz’ product could have been determined by a standard method, yet neither party did so [740: 102 / 741: 87]. Zinn J refused to draw any adverse inference from Fournier’s failure to carry out the relevant test, because Sandoz could equally well have carried out the test itself [740: 132 / 741: 87]. But the burden in an NOC proceeding is on the patentee to show that the generic’s allegations are not justified, and the evidence which Fournier did advance was inadequate to establish infringement [740: 129 / 741: 91].

The main legal battleground in the case was claims construction. The claims were well-drafted, so that the specification generally supported a straightforward reading of the text of the claims, but one point of interest arose 2012 FC 741, dealing with the ‘576 patent. A central issue was Sandoz’ submission that the term “micronized” in the phrase “a micronized form having a particle size less than or equal to about 20 μm,” should be interpreted as excluding particles less than 1 μm in size. Sandoz introduced evidence drawing on the common general knowledge in support of that interpretation. Zinn J responded by pointing out that the phrase “in micronized form” was specifically defined in the specification [65], and “where an inventor specifically provides a definition of a phrase used in the patent, that definition must be the prime consideration when interpreting the phrase and not the meaning that may or may not be ascribed any particular word in the phrase so defined” [66]. This is consistent with the principle that the specification may “provide[] the dictionary by which the scope and effect of these terms [of the claim] is to be ascertained” (Western Electric Co. v. Baldwin International Radio, [1934] S.C.R. 570 at 593). It is also consistent with the broader principle that “[t]he claims, of course, must be construed with reference to the entire specifications.” (Metalliflex Ltd. v. Rodi & Wienenberger Aktiengesellschaft, [1961] S.C.R. 117, 122 quoted with approval per Binnie J. Free World Trust 2000 SCC 66 at [52]; see also Electric & Musical Industries v Lissen Ltd (1939) 56 RPC 23 at 39 (HL): “The claims must undoubtedly be read as part of the entire document, and not as a separate document.”)

No New Cases for the Week of 1 July

No new non-procedural patent / NOC / data protection cases were released by the Federal Courts in the week of 1 July. There was one costs decision, refusing to award solicitor-and-client costs, but awarding costs on an elevated scale (Column V of Tariff B). Also, Beeser Ramamoorthy reports that Zinn J has refused to grant an order of prohibition in respect of fenofibrate tablets, but the reasons remain confidential.

No Contributory Infringement Without “But For” Causation

Apotex Inc v Nycomed Canada Inc / pantropazole 2012 FCA 195 Noël JA: Evans, Sharlow JJA aff’g 2011 FC 1441 Simpson J (blogged here).

Nycomed’s ‘748 patent claims a combination of pantoprazole with a heliobacter inhibiting anti-microbial agent. Apotex and Novopharm sell generic pantoprazole. Since the ‘748 patent does not claim pantoprazole itself, Nycomed sought to allege that the generics’ sale of pantoprazole constitutes contributory infringement. The theory is that pharmacists and physicians who dispense or prescribe pantoprazole and an anti-microbial agent are direct infringers, and the generics have “contributed to the infringing activities of these third parties through its product monograph, website and its marketing strategies to physicians and pharmacists” [FC 2].

The factual problem for Nycomed is that the combination of an antibiotic with a proton pump inhibitor (PPI), such as pantoprazole, is now the “gold standard” for the treatment of ulcers caused by H pylori (see 2006 FC 1411 at [30]), so it is very likely that substantial infringement would occur regardless of the generics’ marketing. Nycomed therefore sought to allege that the generics were liable for contributory infringement “distinct from the ‘but for’ allegation of inducement” [FC 2].

The legal problem with this claim is that contributory infringement is not recognized as such in Canadian law. As the FCA stated in Beloit Canada Ltee/Ltd et al v Valmet Oy (1988) 20 CPR(3d) 1 (FCA) (citations omitted):

Moreover, it is well established that there is no infringement of a patent in selling an article which does not in itself infringe the patent even when the vendor knows that the purchaser buys the article for the purpose of using it in the infringement of the patent. There seems to be only two exceptions to that rule, namely, that there is infringement:

(a) if the vendor, alone or in association with another person, sells all the components of the invention to a purchaser in order that they be assembled by him; and

(b) if the vendor, knowingly and for his own ends and benefit, induces or procures the purchaser to infringe the patent.

The second branch, inducement, is defined by the following three part test, set out most recently in Corlac v Weatherford 2011 FCA 228 at [162]:

First, the act of infringement must have been completed by the direct infringer.

Second, the completion of the acts of infringement must be influenced by the acts of the alleged inducer to the point that, without the influence, direct infringement would not take place.

Third, the influence must knowingly be exercised by the inducer, that is, the inducer knows that this influence will result in the completion of the act of infringement.

The second part amounts to a requirement that the direct infringement would not have taken place “but for” the acts of the alleged inducer.

Consequently, Simpson J held that Nycomed could not amend its claim to allege contributory inducement distinct from the “but for” allegation of inducement. Nycomed argued that the SCC decision in Monsanto v Schmeiser, 2004 SCC 34 had changed the law. Simpson J disagreed, and the FCA affirmed, saying “we adopt the reasoning set out at paragraph 27 of her reasons for holding that the decision of the Supreme Court in Monsanto Canada Inc. v. Schmeiser, 2004 SCC 34, is not indicative of an intention to depart from the existing precedents and to recognize 'contributory infringement' as a cause of action under the Canadian law.” My own view is also that Simpson J’s interpretation of Schmeiser was entirely correct.

There is nonetheless a problem in this kind of situation, at least in principle. Assume that the physicians are directly infringing, as alleged. Suppose that most would have infringed in any event, but in a substantial minority of cases, say 40%, the generics were the “but for” cause of the direct infringement. In that case Nycomed would not be able to establish “but for” causation for physicians as a class, even though the generics marketing efforts were the “but for” cause of a substantial loss.

This is exactly the problem of mass torts, which was addressed at common law by permitting liability based on “material contribution” rather than but for causation: see McGhee v National Coal Board [1972] 3 All ER 1008 (HL). This solution is very unsatisfactory, as it raises the opposite problem, that the defendant might be liable for all the loss, even though it was only the “but for” cause of a part. Material contribution is consequently disfavoured: see, most recently, Clements v. Clements, 2012 SCC 32. In refusing to relax the causation requirement for contributory infringement to something approaching material contribution, the FCA holding in this case is consistent with this general trend. The problem is solved more satisfactorily by class actions, in which the defendant can be made liable for only the proportion of the harm that it actually caused. I am not suggesting that a class action would be appropriate in this case. Class actions allow a class of plaintiffs to sue a single defendant for what might be called “contributory” causation, rather than allowing a single plaintiff to sue a class of defendants, and in any event, Nycomed wants to sue the generics, not the doctors. The point is simply that there is a real problem in principle which is not satisfactorily addressed by “but for” causation.

At another level, the problem is that the only practical means of enforcing the patent at issue in this case, or a use patent, as was at issue in Abbott / lansoprazole (NOC) 2006 FC 1411 aff’d 2007 FCA 251, is by an action against the generic, and yet the generic is entitled to sell the individual compound. I can’t help but think that there must be a better way of sorting this out than disputing over whether 40% or 60% of doctors would be influenced by the product monograph, but I have to admit that I can’t think of what that better way might be.

Can Comity Rationalize NOC Litigation?

Allergen Inc v Apotex Inc / COMBIGAN (NOC) 2012 FC 767 Hughes J

In Allergen Inc v Apotex Inc / combigan (NOC) Hughes J faced an NOC proceeding involving the same product and the same patent, but a different generic, as was addressed by Crampton J in Allergan Inc v Sandoz Canada Inc / combigan (NOC) 2011 FC 1316 (blogged here and here). Crampton J held that Sandoz’s allegation that Allergan’s 764 patent was invalid for obviousness was not justified. In contrast, Hughes J concluded that Apotex’s allegation that the patent was invalid for obviousness was justified. Hughes J nonetheless granted an order of prohibition, citing the need for comity. He also expressed concern that “that this Court is overwhelmed at times with NOC Regulation proceedings,” [70] and that it is necessary for the FCA to give instruction on the question of “how, in an NOC context, previous decisions of a Court on the same issues respecting the same patent, should be considered” [193]. He concluded that “only practical way to get the matter before the Court of Appeal is for me to grant the Order for prohibition in the likely expectation that Apotex will appeal” [194].

Refusal of Joinder Affirmed

Janssen Inc v Teva Canada Ltd 2012 FCA 137 Pelletier JA: Sharlow, Stratas JJA

In brief reasons from the bench, Pelletier JA affirmed the order of Hughes J in 2011 FC 1480, blogged here, dismissing a motion for the joinder of parties.

No Section 8 Recovery of Losses Incurred Outside Compensable Period

Teva Canada Ltd v Nycomed Canada Inc 2012 FCA 129 Evans JA:Dawson, Stratas JJA

In a brief decision upholding an order to strike portions of Teva’s statement of claim, the FCA has reaffirmed that in a claim for damages under section 8 of the NOC Regulations, losses incurred by a generic after the end of the compensable period are not recoverable, even if the losses were caused by the statutory stay. The rule was established in Merck Frosst Canada Ltd v Apotex Inc / alendronate (NOC) 2009 FCA 187 (old Regulations) and Teva Canada Ltd v Sanofi-Aventis Canada Inc / ramipril (NOC) 2011 FCA 149 (new Regulations, blogged here). This brief decision adds nothing, except to say that Sharlow JA’s dissent in the ramipril decision will not cause the FCA to reconsider: “Teva's remedy is to apply again for leave to appeal to the Supreme of Court of Canada where Justice Sharlow's dissent can be considered again, and not to re-litigate in the Federal Court and in this Court a matter that has already been decided” [11].

Is the Essentiality of a Claim Element a Question of Fact?

Hollick Solar Systems Ltd v Matrix Energy Inc 2012 FCA 174 Létourneau JA: Blais CJ, Pelletier JA aff’g 2011 FC 1213 Scott J (blogged here)

Hollick brought an action alleging that Matrix infringed its patent in a solar air heating system. Matrix defended on the basis that its system did not infringe, as the patent specified that the heated air is removed into the building through a plenum at “the top” of the panels, while the defendant’s device placed the air intake at the bottom of the panel. Since a patent may be infringed despite a substitution of a non-essential element of the invention (Free World Trust 2000 SCC 66 [55]), the question was whether the location of the air intake at the top of the panel was an essential element. Scott J’s opinion is one of the very few decisions to actually apply the three-step Improver test for essentiality that was approved in Free World Trust at [55]-[56]. The first step in that test is to ask whether the “variant” – the defendant’s device – has “a material effect on the way the invention works.” But what is meant by “the invention”? The inventive concept, or the invention as claimed? This question was raised directly on the facts (though it was not addressed specifically in the decision), as it appears that the defendant’s system was less efficient, and the placement of the intake at the bottom was intended to avoid the claims. Scott J at trial held that it was essential, and therefore the defendant’s system did not infringe, as the placement had a material effect on the way the invention worked: “The criteria is not whether the variant improves the performance of the invention but rather does it have a significant effect on how the device functions, be it positive or negative” [59]. Because Scott J considered only the claims, and not the inventive concept in coming to this conclusion, it is implicit that he took “the invention” in the Improver test to mean the invention as claimed.

The only question dealt with on appeal was whether Scott J erred in holding that the placement of the intake was an essential element. The FCA affirmed, noting that the determination of whether there was a material effect depended on the testimony of expert witnesses, and “[w]e are in effect asked to second-guess the judge on his appreciation of expert evidence on factual issues and issues of credibility, and then substitute our own appreciation” [17]. The FCA stated that it was not persuaded that Scott J had made an error of law or an overriding and palpable error on a question of fact or mixed law and fact.

This holding has two interesting implications. First, it indirectly affirms that “the invention” in the Improver test means the invention as claimed, not the inventive concept. However, it is not particularly strong authority on this point, as the question of the correct interpretation of the Improver questions point was not raised specifically either at trial or on appeal. As I noted in my post on Scott J’s decision, my own view is that the better interpretation of the Improver questions is that “the invention” means the inventive concept. With that said, the answer is certainly not easy to extract from the “mangle” of the Improver decision.

Second, the standard of review applied by the FCA implies that the question of whether an element is material is a question of fact, or at least mixed fact and law, and is therefore entitled to deference. Does this also mean that the question of whether an element is essential is a question of fact? Are the three different questions in the Improver test to be assessed on different standards? This question is not easy to answer, given that the Improver test is not consistently used. The FCA’s point that evaluation of technical evidence was required is certainly compelling on the facts in Hollick, but its approach may be contrasted with that taken by the FCA in Easton Sports Canada Inc. v Bauer Hockey Corp 2011 FCA 83, (blogged here). In Bauer the FCA affirmed the trial decision that the element was essential only after a detailed consideration of the evidence, and rather than affirming on the basis of lack of error, the FCA held affirmatively that the element in question “is an essential feature of the claim” [54]. With that said, it is not clear whether this reflects any difference in principle, or simply reflects differences in the way the cases were argued.

No New Cases for the Week of 10 June

No new patent / NOC / data protection cases were released by the Federal Courts in the week of 10 June.

Certification Not Required to Establish Start Date for Section 8 Compensable Period

Apotex Inc v. Merck & Co., Inc. / lovastatin (NOC) 2012 FC 620 Snider J on remand from 2011 FCA 364 (blogged here)

Section 8(1)(a) of the NOC Regulations provides that the presumptive start date for the compensable period under s 8 is “the date, as certified by the Minister, on which a notice of compliance would have been issued in the absence of these Regulations.” In this case, there was no evidence that the Minister had certified a date. Snider J held that despite the absence of a certification, the appropriate start date was the date on which, on the facts, Apotex would have received its NOC:

[15] Merck is correct that there is no Ministerial “certification” of May 25, 1996 as contemplated by s. 8(1)(a). However, I am satisfied that, but for the Regulations, Apotex would have received its NOC for Apo-lovastatin no later than May 25, 1996.

Thus certification by the Minister is not a prerequisite to recovery of s 8 damages; the main consideration is when the generic would have received its NOC, but for the Regulations. In this case it was uncontroversial that the “patent hold date” was May 25, 1996 [14]. This conclusion is somewhat difficult to reconcile with the text of the Regulations, as even the discretion provided for in s 8(1)(a)(ii) refers to “the certified date.” However, the evident purpose of the Regulations is to permit recovery from the patent hold date, and it is reasonable to interpret the certification date as being a matter of evidence rather than substance. The 1998 amendments to the Regulations remedied many drafting problems in the notoriously obscure 1993 version, but it not surprising that more drafting issues will arise as s 8 cases are fully litigated.

Resolution on Section 8 Claims re Valid Patents

Apotex Inc v. Merck & Co., Inc. / lovastatin (NOC) 2012 FC 620 Snider J on remand from 2011 FCA 364 (blogged here)

What happens if a generic is successful in NOC proceedings, but unsuccessful in a subsequent infringement action? Can the generic claim s 8 damages for being kept out of the market by the statutory stay, on the principle that the NOC proceedings and the infringement proceedings are independent? Or is the generic barred from claiming s 8 damages, on the principle that it would have been infringing a valid patent by entering the market? We appear to finally have resolution on this question as Snider J’s lovastatin decision and Hughes J’s omeprazole decision, blogged here, give consistent answers to this question.

Constructing the “But For” World in Section 8 Damages

Teva Canada Ltd v Sanofi-Aventis Canada Inc / ramipril (s 8) 2012 FC 552 Snider J
Apotex Inc v Sanofi-Aventis Canada Inc / ramipril (s 8) 2012 FC 553 Snider J

Apart from the question of the compensable period, Teva / ramipril (s 8) and Apotex / ramipril (s 8) (discussed here and here) raised similar legal issues, and indeed similar factual issues, regarding the assessment of damages, as both cases turned on the construction of the hypothetical “but for” market for ramipril that would have obtained had the prohibition order not been granted. Common legal questions regarding the burden of proof, whether the generics could recover for lost off-label sales, and whether lost business value is recoverable, were also raised. Snider J’s analysis of the legal questions is the same in both cases, and the relevant discussion is often identical save to references to Teva or Apotex. For convenience, in this post I will cite paragraphs to the Teva decision, and refer Teva as the generic, except where there is a relevant difference, but it should be recognized that the same analysis is also provided in the Apotex decision.

Snider J assessed s 8 damages on the basis of the generally applicable principle of “but for” causation, which requires a comparison between the actual state of affairs and the court’s best assessment of what would have happened in the hypothetical world had the statutory stay not been triggered [5]. Generally, Snider J constructed the hypothetical world almost entirely as a matter of determining what would in fact have happened, without regard to various arguments that particular consequences should be ignored for policy purposes.

More Debate on the Compensable Period under Section 8

Apotex Inc v Sanofi-Aventis Canada Inc / ramipril (s 8) 2012 FC 553 Snider J

Yesterday’s post discussed the question of the start date of the compensable period for a s 8 claim in Teva / raimpril (s 8). Today’s post discusses the parallel question in Apotex / ramipril (s 8), in which both the start date and the end date were in dispute. Note that of the four dates to be determined in the two cases, only the end date in Teva was uncontroversial. Nor were any of the disputes easy to resolve; all raised significant legal questions relating interpretation of the Regulations. While the facts of both Teva / ramipril (s 8) and Apotex / ramipril (s 8) were unusual in certain respects, NOC litigation is very complex, and no doubt many cases are unusual in one way or another. That the first two cases to arrive at an assessment of s 8 damages have raised difficult issues of interpretation suggests that future litigation will continue to reveal uncertainty in the application of s 8 of the NOC Regulations. This is not to impugn the drafting; anticipating the future fact patterns is no easier for legislative drafters than it is for patent drafters.

Compensation Period in S 8 Action Cannot Begin Prior to Date of Statutory Stay

Teva Canada Ltd v Sanofi-Aventis Canada Inc / ramipril (s 8) 2012 FC 552 Snider J

I believe that the companion cases of Teva / ramipril (s 8) and Apotex / ramipril (s 8) 2012 FC 553 are the first s 8 cases to go all the way to the assessment of damages. Snider J's decisions establish a number of important points concerning the start date for the compensable period, the nature of the “but for” scenario which forms the basis for assessing damages, and the nature of the recoverable damages. Overall, Snider J’s approach can be summed up in one sentence: “I am being asked to assess damages as though no prohibition application had been brought.” [183]. That is, Snider J assessed s 8 damages on the basis of the generally applicable principle of “but for” causation, which requires a comparison between the actual state of affairs and the court’s best assessment of what would have happened in the hypothetical world had the “wrong” not occurred. The “wrong” in this context is the statutory stay triggered by the prohibition application; it is not Teva having been kept out of the market by the operation of the NOC Regulations as a whole. (I put “wrong” in quotations as there is no legal wrong in Sanofi having brought the prohibition application; I use the term to emphasize the parallel with the ordinary principles of but for causation of damages in tort law.) From that causal trigger, Snider J constructed the hypothetical world almost entirely as a matter of determining what would in fact have happened, without regard to various arguments that particular consequences should be ignored for policy purposes. The qualification to that strictly factual approach to constructing the “but for” scenario is that Snider J applied the rule, established in Merck Frosst Canada Ltd v Apotex Inc / alendronate (NOC) 2009 FCA 187, that losses caused by the stay, but incurred outside the compensable period, are not recoverable as a matter of law.

This post deals with the question of the start date of the compensable period (referred to by Snider J as the "Relevant Period) in Teva / ramipril (s 8). The parties agreed that the end date for the compensation period is 27 April 2007, when the application was dismissed. The NOC Regulations s 8(1)(b) do not allow for any discretion in this respect. But the parties disputed the appropriate start date. Section 8(1)(a) of the NOC Regulations provides that the start date for the compensation period is presumptively the date “on which a notice of compliance would have been issued in the absence of these Regulations,” unless the court concludes that another date is more appropriate.

Snider J Also Rejects Validity Attacks on Section 8

Teva v Sanofi; Apotex v Sanofi / ramipril (NOC) 2012 FC 551 Snider J

Validity attacks on s 8 of the NOC Regulations were raised by Sanofi in two separate actions before Snider J, in which Teva and Apotex are seeking to recover s 8 damages. The same arguments were raised before Hughes J by AstraZeneca in similar circumstances. By agreement of the parties, the validity arguments in all three cases were argued before Snider J and Hughes J together. As described in my previous post, Hughes J rejected these arguments. In her decision dealing with this point alone, Snider J has done the same. Snider J held that most of the validity attacks raised by Sanofi did not arise on the facts of the particular disputes. On the question of whether s 8 complies with TRIPS and NAFTA, Snider J adopted the reasons of Hughes J as her own [55].

Futile Attacks on Section 8 of the NOC Regulations

Apotex Inc v AstraZeneca Canada Inc / omeprazole (NOC) 2012 FC 559 Hughes J

In Apotex v AstraZeneca / omeprazole AstraZeneca attacked the validity of s 8 of the NOC Regulations on various grounds, which were all rejected by Hughes J. While the objections were framed phrased a number of ways, AstraZeneca had two basic complaints.

First, AstraZeneca in effect complained that it is being punished simply for invoking section 6 of the NOC regulations: [115]. The essential answer to this is that section 6 and section 8 are a package, and if AstraZeneca does not want to expose itself to section 8 liability, it should not seek to a stay: “In making a choice to list a patent and a choice to institute prohibition proceedings, that party must be mindful that, just as if it had given an undertaking in order to secure an  interlocutory injunction, it must make good the losses suffered by the other party should it fail to secure the prohibition Order” [58]. There is nothing unfair about this, since the automatic stay, like an interlocutory injunction, being decided on the basis of limited information, may wrongly interfere with the rights of the other party. The quid pro quo for the stay is that the patentee will be liable for that harm in the case the stay is “wrongly” triggered. It is worth remembering that the greater availability of interlocutory injunctions formalized in American Cyanamid emerged as a result of the practice of requiring an undertaking from the applicant to compensate the defendant if the defendant’s position was ultimately vindicated. When the applicant was not liable to compensate the defendant, the courts would require a much stronger showing on the merits before granting an interlocutory injunction.

The second basic complaint was that liability under s 8 strikes the wrong “balance” [94], [97]. But as Hughes J pointed out, “[i]t is for Parliament to provide for the appropriate weighing or balancing of interests in enacting the Patent Act, and for the Governor-in-Council to do likewise in promulgating the NOC Regulations. There is no independent ground for arguing that section 8 of the NOC Regulations is invalid, simply because it was not “balanced” in the view of one of the interested parties” [99].

Award under NOC Section 8 to Be Considered in Damages in Subsequent Infringement Action

Apotex Inc v AstraZeneca Canada Inc / omeprazole (NOC) 2012 FC 559 Hughes J

The automatic stay available to the patentee under s 7(1) of the NOC Regulations is analogous to an automatic interlocutory injunction, and s 8 damages available to the generic are analogous to damages on the undertaking normally required of an applicant who obtains such an injunction: 2008 FC 1185 [54]. One important difference is that while an interlocutory injunction is brought as part of the infringement action, NOC proceedings and an infringement action are entirely separate. This gives rise to a problem of coordinating remedies if the final decision is inconsistent with the “interlocutory” stage. It is now well-established that if the generic is unsuccessful in the NOC proceedings, it cannot claim damages under s 8 if the patent is subsequently held to be invalid (Apotex v Syntex / naproxen (NOC) 2010 FCA 155). This is even though a defendant would have been able to recover such losses on the undertaking if the NOC system did not exist, and an interlocutory injunction, rather than an automatic stay, had been granted to patentee.

This decision of Hughes J is an important development in addressing the converse problem: is the generic entitled to s 8 damages even if the patent is later held to be valid and infringed by the same generic in an infringement action? If an interlocutory injunction is granted, the defendant is entitled to damages on the undertaking only if it is subsequently successful in the action itself. The separation of the NOC proceeding from the infringement action implies that in contrast, a patentee will be liable to a generic which is successful in the NOC proceedings, even if the patent is subsequently held to be valid and infringed. The difficulty with this result is that the generic would be entitled to damages for having been kept out of a market which it had no right to enter, as a holding in an NOC proceeding does not have in rem effect.

Equitable Election Does Not Preclude a Section 8 Claim after Amalgamation

Teva Canada Limited v. Wyeth LLC, 2012 FCA 141 Sharlow JA: Dawson, Stratas JJA rev’g 2011 FC 1169 Hughes J

Wyeth entered into authorized generic agreement with Novopharm under which Wyeth licensed Novopharm to sell a generic version of a Wyeth drug. To protect Novopharm’s position as the authorized generic, Wyeth also agreed to make commercially reasonable efforts to enforce the patent against third parties. Ratiopharm then served an NOA on Wyeth. At Novopharm’s request pursuant to the agreement, Wyeth instituted NOC proceedings against Ratiopharm. Wyeth lost, and Ratiopharm brought a section 8 claim against Wyeth. Then, after Novopharm changed its name to Teva, Teva and Ratiopharm amalgamated. Teva is seeking to continue Ratiopharm’s section 8 claim against Wyeth, on the basis of the rule that an existing cause of action is unaffected by amalgamation.

In the decision under appeal, Hughes J held that in the circumstances the doctrine of equitable election precluded Teva from continuing the section 8 action. The FCA has now reversed, pointing out that Novopharm’s request that Wyeth institute proceedings against Ratiopharm, could not affect Ratiopharm’s right to section 8 damages [36]. In my view, this reasoning is sound. Neither Ratiopharm nor Novopharm ever elected between two inconsistent courses of action; any apparent inconsistency arose only subsequently, as a result of the amalgation. As I noted in my post on the decision under appeal, the result is not unfair to Wyeth, which is exposed to the same liability that it would have faced if Novopharm and Ratiopharm had not merged. There is no reason why that merger should confer a windfall on Wyeth.

A second question, not addressed by Hughes J given his decision on equitable election, was whether Wyeth was entitled to an order to the effect that Ratiopharm’s claim for section 8 damages, now continued by Teva, should be reduced to reflect gains realized by Novopharm, Teva’s other corporate predecessor, under its licence agreement with Wyeth [38]. Wyeth’s argument is that while in fact Novopharm had the generic market to itself, in the “but for” scenario which forms the basis for assessing Ratiopharm’s damages, Ratiopharm and Novopharm would have shared the market [40]-[41]. This means that Novopharm’s profits in the “but for” scenario would have been lower than they were in fact. If Ratiopharm’s damages are not adjusted to reflect this excess profit actually gained by Novopharm, then Teva will be in a better position than it would have been had the “but for” scenario actually taken place [43]. The FCA rejected this argument as well.

This conclusion is also seems to me to be correct. If Novopharm and Ratiopharm had not merged, Novopharm would have gained the same windfall, and this would not be any objection to Ratiopharm’s claim. Further, such a windall to Novopharm must have been contemplated by Wyeth, as the possibility of third party generic entry was expressly addressed in the agreement between them. Wyeth could have controlled that windfall by contract, for example by specifying that Novopharm would be bear a corresponding share of the liability for section 8 damages if Wyeth’s efforts to exclude third party entry were unsuccessful. On its face, the contract allocated the risk entirely to Wyeth; presumably as a consequence, Wyeth obtained a better royalty than if Novopharm had shared the risk. If Wyeth could now require Teva to offset the excess profits gained by Novopharm, it would in effect be doing an end-run around the contractual allocation of risk.

Relevance of Non-infringing Alternatives to Damages

Merck & Co, Inc v Apotex Inc / lovastatin 2012 FC 454 Rennie J*

This decision by Rennie J on a motion to strike is the first step in a potentially significant change in the law of damages. In the liability portion of this bifurcated action, Snider J found Apotex liable for infringement of Merck’s patent protecting a process for making lovastatin: 2012 FC 1265 (overview here). Merck sought an accounting, but was denied. This is a preliminary motion in the damages portion of the action, in which Apotex sought to amend its statement of defence to plead that it could have employed a non-infringing alternative process for producing Apo-Lovastatin. While the decision implies in places that this is raised as a complete defence, it is more precise to say that the non-infringing alternative should be considered in determining the hypothetical position that Apotex would have been in but for the infringement [12].

This plea was rejected by Prothonotary Aronovitch, in light of the decision of the House of Lords in United Horse-Shoe and Nail Co Ltd v Stewart Co (1888), 5 RPC 260 (HL), which explicitly held that the existence of a non-infringing alternative is irrelevant to the calculation of damages, and the acceptance of that decision in Domco (1986), 10 CPR (3d) 53 (FCTD) and Jay-Lor 2007 FC 358. Rennie J held that despite this authority, which was properly interpreted by the Prothonotary, Apotex’s position was an arguable claim which should be allowed to proceed to trial. He pointed out that there was some support for Apotex’s position in US law and that there were only two cases on point in Canadian law [24]. Most importantly, at [25]-[27] he accepted Apotex’s argument that the principle in United Horse Shoe was potentially subject to reassessment in light of the general principles of causation in calculation of monetary remedies stated by the SCC in Cadbury Schwepps v FBI Foods [1999] 1 SCR 142 and Canson Enterprises [1991] 3 SCR 534.

My view is that Rennie J was clearly correct in allowing this pleading to stand. As I argued in “A Remedial Benefit-Based Approach to the Innocent-User Problem in the Patenting of Higher Life Forms” (2004), 20 CIPR 79 at 93-95, the principle stated in United Horse Shoe is inconsistent with the “but for” approach to causation which has been invariably accepted by the SCC as the correct approach to all forms of monetary remedy. My article was relied on by the SCC in Monsanto Canada Inc. v. Schmeiser, 2004 SCC 34 [102] as stating the correct principle in respect of an accounting of profits, and, as I argued in the article, there is no difference in principle on this point between an accounting and damages. (I would also point out that Jay-Lor is not particularly strong authority on this point, as it was clear on the facts that the defendant could not have competed as effectively without infringing.)

*In my initial post I misidentified the judge as Zinn J, rather than Rennie J. My apologies.

A Purposive Interpretation of the Promise of the Patent

Astrazeneca Canada Inc v Mylan Pharmaceuticals ULC / anastrozole (NOC) 2012 FCA 109 Evans JA: Sharlow, Dawson JJA aff’g 2011 FC 1023 Rennie J

After the shocking decision in Pfizer v Apotex / latanoprost (NOC) 2011 FCA 236, blogged here, this brief decision of the FCA in Astrazeneca v Mylan / anastrozole (NOC), is the second FCA decision in a row to adopt a moderate approach to interpreting the promise of the patent, coming close on the heels of Mylan v Pfizer / donepezil (NOC) 2012 FCA 103 (blogged here). Whether this marks a trend, or a split in the Court, remains to be seen.

In the decision under appeal, blogged here, Rennie J developed a principled approach to construing the promise of the patent by considering text, context and purpose. While the FCA did not specifically hold that this approach was required, as Mylan did not contest Rennie J’s interpretive framework [21], the FCA decision considered much the same factors as did Rennie J, and in a similarly holistic fashion. This may be simply because Rennie J’s decision shaped the points argued on appeal, but nonetheless, in tenor the FCA decision provides an endorsement of Rennie J’s framework. The appeal turned primarily on the interpretation of a sentence stating that it is “a particular object of the present invention to provide” compounds with fewer undesirable side effects than a prior art compound, aminogluthethimide (AG) [8]. Mylan invited the Court to interpret this as being determinative of the promise. The Court rejected this “microscopic” approach to the promise as “misguided” [32]. This is in contrast to the latanoprost decision, 2011 FCA 236, in which a somewhat differently constituted panel (Sharlow JA was on both) focused microscopically on the fact that the claimed invention was intended to treat a chronic disease.

The FCA anastrozole decision also has some very interesting dicta that further suggests a principled shift in the approach to the promise of the patent. At the outset the Court noted that the invention met the minimum threshold required for utility, and was therefore patentable as of the filing date, unless the patent promised more than the required minimum [7]. The Court subsequently noted at [30] that

it is agreed that the 420 patent would be valid if it only claimed the compound anastrozole and its inhibitory effects on aromatase. It was thus unnecessary for the patent also to promise fewer side effects than AG. Even though tests, which AstraZeneca did not disclose, had been conducted showing that anastrozole was selective, a promise in the patent to this effect would be entirely gratuitous, and could only provide competitors with another basis for attacking its validity.

Similarly, at [37]

even if anastrozole would not be commercially or clinically useful if it produced no fewer side effects than AG, it is agreed that it was patentable as a novel and useful compound, and as an aromatase inhibitor. It would be rational to seek patent protection for anastrozole on this basis, in case it turned out to be selective. . .

This suggests, in effect, that if an inventor has in fact invented and disclosed a patentable invention, she should be presumed to want a valid patent for it. As I have argued elsewhere, this accords both with common sense, and with a purposive approach to patent interpretation. As the SCC has said, “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." (Consolboard [1981] 1 SCR 504 at 521, quoting Western Electric v Baldwin Int’l Radio [1934] SCR 570 at 574). If taken to its logical conclusion, this implies that a patentee should never be presumed to promise more than the minimum scintilla of utility required to sustain a valid patent. If that presumption were determinative, the entire promise of the patent doctrine would collapse. However, that presumption of purpose is not determinative within the framework articulated by Rennie J, because text and context must also be considered. It is nonetheless a powerful point in favour of construing the promise of the patent minimally.