Transitional Troubles with Perfect Match Listing Requirement

Gilead Sciences Inc v Apotex Inc / (NOC) 2016 FC 231 Heneghan J
            2,261,619 / tenofovir (PMPA) / TRUVADA

Section 4 of the PM(NOC) Regulations governs whether a patent is eligible for listing on the patent register. In Gilead / COMPLERA 2012 FCA 254 (blogged here) and ViiV Healthcare 2015 FCA 93 (here) the FCA interpreted s 4 as requiring a perfect match between the patent claims and the medicinal ingredients in the approved drug – each of the medical ingredients in the drug would have to be specifically named in the a claim – before the patent can be listed. So, if a drug contained two medicinal ingredients, and the patent claimed one of those ingredients but not the other, the patent could not be listed. On 19 June 2015, shortly after Viiv was decided, the Regulations were amended by SOR/2015-169, to provide in s 4(2.1) that a patent is eligible for listing even if the drug contains more medicinal ingredients than are listed in the patent. The express intent of the amendment as set out in the accompanying RIAS was to reverse Gilead / COMPLERA and Viiv. To complicate matters, just before the amendment came into force, the FCA released its decision in Eli Lilly / TRIFEXIS 2015 FCA 166, which distinguished Gilead / COMPLERA, albeit not very convincingly, in my view, and allowed a patent to be listed even though the claims did not perfectly match the medicinal ingredients.

The overarching issue in this case is whether the ‘619 patent is eligible for listing against TRUVADA [1]. (While this is an NOC proceeding, a patent that is not eligible for listing need not be addressed pursuant to paragraph 6(5)(a) of the Regulations.) TRUVADA has two medicinal ingredients and the ‘619 patent did not claim one of them [117]. Thus, it was common ground that the ‘619 patent was not eligible for listing if Gilead / COMPLERA and Viiv stated the applicable law.

There were two sub-issues. First, did the amended Regulations apply? If not, did Eli Lilly / TRIFEXIS reverse Gilead / COMPLERA and Viiv?

On the first issue, the transitional provisions provide that the amended Regulations would apply to “any ongoing application. . .that are initiated during the period that begins on May 2, 2015 and ends on the day on which this section comes into force [June 19, 2015]” [19]. Heneghan J held, I think rightly, that the “plain and ordinary meaning” of those words “is that the Unamended Regulations apply in respect of any motion that was filed before May 2, 2015.” Since Apotex filed its Notice of Motion on March 6, 2015, it followed that unamended Regulations applied [113]. While Gilead raised a variety of counter-arguments, the strongest – or at least the most interesting – is that the RIAS expressly stated that the amendments “would restore the intent of the original and amended PM(NOC) Regulations, and clarify ambiguities regarding the listing requirements.” In Merck Frosst v Apotex / norfloxacin 2011 FCA 329, discussed here the FCA held that a clarifying provision is not retroactive and “is not evidence of a change of approach by legislators, but rather a desire to ensure that earlier laws ‘reflect the principles [legislators] had in mind and communicated when the law was passed’” [50]. The RIAS echoes this language, saying that the amendments were intended to “capture the original policy intent of the listing requirements.” If the amendments were merely clarifying, then they should apply regardless of when the motion was filed, as the law should not be taken to have changed. The difficulty with this argument is that if it was true that the amendments were merely clarifying, the transitional provision itself would be redundant and meaningless. Evidently the legislators recognized that while the amendments were restoring the original intent of the Regulations, they were changing the law which was set out in Gilead / COMPLERA and Viiv.

On the next issue, Gilead argued that even if the amended Regulations did not apply, the effect of Eli Lilly / TRIFEXIS was to reverse the earlier FCA cases. I have a great deal of sympathy for this view: my post on TRIFEXIS was titled “No More Perfect Match Requirement for Patent Register Listing.” But Heneghan J held that TRIFEXIS “made a distinction on the facts.” That is very reasonable view of the majority decision – indeed, it is how the majority in TRIFEXIS characterized its own decision: “this examination of the facts and holdings in Gilead FC and Gilead FCA distinguishes these decisions from the present appeal” [88]. I must add that Dawson JA in her concurrence could not see the basis for the distinction, and neither can I. And while Heneghan J said “I agree with Apotex that the three decisions can be read consistently” [112], she did not explain how that could be done. Nonetheless, Heneghan J was undoubtedly entitled to take the majority’s explanation of its decision at face value. The difficulty, as I said in my post on TRIFEXIS, is that “[t]he main justification for adhering to precedent is to provide certainty. But an unfounded distinction does the opposite; we now have two irreconcilable decisions that are both formally good law.” The result in any given case will turn on which of the two lines of precedent the subsequent court chooses to follow. Fortunately, the conflict between these FCA cases will be moot in future cases in which the amended Regulations apply.

Barnes J Disagrees with Rennie J as to Whether Enhanced Disclosure Requirement Applies Only in New Use Cases

Eli Lilly Canada Inc v Hospira Healthcare Corp (NOC) 2016 FC 47 Barnes J
            1,340,794 / pemetrexed / ALIMTA

In this decision Barnes J held Takeda’s ‘794 patent (licensed by Lilly [2]) covering pemetrexed to be invalid for lack of sound prediction of utility. The most interesting legal point is that Barnes J rejected Rennie J’s view, expressed in Apotex / esomeprazole 2014 FC 638, that the heightened disclosure requirement for sound prediction applies only in new use cases.

The ‘794 patent relates to a class of compounds including pemetrexed, which, according to the patent “are useful as anti-tumor agents” [31]. All the claims at issue are compound claims. Pemetrexed is not specifically claimed or disclosed, but it falls within Claims 7 and 9 [12], which claim a class of compounds. Only some compounds falling within those claims had been tested as of the filing date, and the key question was therefore whether “the person of skill in 1989 [the filing date] could have soundly predicted the promised utility of the untested compounds falling within Claims 7 and 9 from the test data reported in the Patent and from what was known in the art” [6]. Whether pemetrexed itself was useful was not even discussed, and even if established would have been relevant, at most, as one more data point in a prediction of utility of the untested compounds.

The parties had the usual dispute over the promise of the patent, with Hospira arguing for an elevated promise and Lilly for a much lower one [25]. Barnes J held that the promise was of “in vivo activity in relation to abnormal tissue” [33], which fell in between the position of the parties. The exact basis for his construction of the promise is not entirely clear. Barnes J found the opinions of the experts to be “largely unhelpful” [26], and he emphasized the statement in the patent that the invention relates to “which are useful as anti-tumor agents,” as well as mentioning similar references to “excellent” or “remarkable” antitumor effect [31], [32]. This is consistent with the trend that any phrase stating that the compounds “are useful”, without a qualifier, will be taken as promise, but it is not clear from his brief discussion why Barnes J construed “anti-tumor agent” to mean in vivo activity (though he did note some expert evidence to that effect [33]). The passages in the patent describing “excellent” or “remarkable” effects that were evidently being referenced by Barnes J mixed specific references to in vitro effect with general statements regarding in vivo effect. So, the specification stated that the compounds “have toxicities highly specific to tumor cells and excellent antitumor effects” (p2),; they “show excellent antitumor effects in mouse tumor cell strains (. . .) and human tumor cell strains (...), decrease the tumors carried by warm-blooded animals . . . and prolong the life-span of tumor-carrying warm-blooded animals” (p25); they “are excellent in inhibition of cell growth of [specified cell lines], while they do not exert a toxicity against [specified cell line]. The compounds (I) of this invention and the salts thereof are of low toxicity, having remarkable antitumor effect. Therefore, the preparations containing the compound (I) or salts thereof can be employed as antitumor agents for the treatment of tumors in warm-blooded animals, particularly mammals. . . .” (p27). The examples of the effects disclosed in the patent all referred to cell lines.

While the references to treatment of tumours in mammals support the view that the patent promised in vivo activity, recall that in Plavix 2013 FCA 186 (here), the FCA encouraged a restrained approach to construction of the promise of the patent, requiring that a promise be explicit [49], [50] and cautioned against ignoring “the distinction drawn in the jurisprudence between the potential use of an invention and an explicit promise to achieve a specific result is considered.” [67]. In Plavix the FCA held that the statement in the ‘777 patent that “the medicine of the invention can be usefully administered in the treatment and prevention of platelet disorders due to extracorporeal blood circuits or the consequence of complications in atheroma,” relied on by the trial judge [163] as indicating an explicit promise of use in humans, was no more than an indication of the “potential use in humans” which was “foreshadowed” in the patent [67]. It strikes me that it is at least arguable that the promise of the ‘794 patent could have been construed similarly, with the specific references to in vitro activity constituting the promise, and the more general references to in vivo treatment cell being foreshadowing of the potential use in humans. Barnes J’s construction of the promise in this case illustrates two points. First, while Plavix seemed to be a signal from the FCA that a more restrained approach should be taken to construing the promise of the patent, the reality seems to be that Plavix has had little effect; as I put it in the title of an earlier post, the “Promise of the Patent is Alive and Well Post-Plavix FCA.” The very brevity of Barnes J’s analysis of the promise emphasizes this point. Despite Plavix, he did not consider it necessary to explicitly consider the possibility that references to in vivo use were merely references to a potential use. The second point is the difficulty in predicting how the courts will construe the promise of the patent, in light of the variety of language touching on utility that is typically found in the disclosure. In this case, as noted above, the court considered that neither party’s submissions were even helpful.

In any event, in the end, Barnes J expressly rejected Lilly’s position that “any measurable in vitro antifolate activity would satisfy the promise of the Patent” [35], which he characterized as “effectively read[ing] the promise down to a ‘scintilla’ of utility” [25], so that Barnes J clearly held utility should be measured against a higher standard of utility than the scintilla that would be required in the absence of an express promise (though it is not clear that Lilly’s position really did amount to asserting a mere scintilla of utility as contrasted with a low promised utility).

On the main legal point of interest, recall that in Apotex / esomeprazole Rennie J, drawing in part of Gauthier J’s concurring remarks in Plavix 2013 FCA 186, held that the effect of the SCC’s obiter remarks in Viagra 2012 SCC 60 was to overturn previous FCA decisions, such as Raloxifene 2009 FCA 97 aff’g 2008 FC 142, which had held that there is a heightened disclosure requirement in all cases where utility is established by sound prediction, such that the factual basis for that prediction and the line of reasoning must be disclosed in the patent itself [142]. On Rennie J's view, the heightened disclosure requirement is now “limited to the context of ‘new use’ patents, assuming such a utility disclosure requirement exists at all” [141]. Barnes J disagreed, saying:

[48] While I have some sympathy for Justice Rennie's and Justice Gauthier's views, I am not persuaded that the state of the law on this issue has changed. In particular, it would take something more than Justice LeBel's apparent reservations [in Viagra] to displace the requirement for disclosure described by Justice Binnie in [AZT 2002 SCC 77] and, later, as clearly endorsed by the Federal Court of Appeal in [Raloxifene 2009 FCA 97], in [Olanzapine (No 1) 2010 FCA 197] and in many decisions of this Court.

Banres J therefore held that “where utility is based on a sound prediction, there remains an obligation to disclose in the patent specification the factual basis and a sound line of reasoning supporting the prediction” [49] I can’t agree with Barnes J’s suggestion that the cryptic comments of Binnie J in AZT established a requirement to set out the factual basis for a sound prediction in the patent itself, but the FCA decisions cited by Barnes J certainly did. And while Rennie J’s interpretation of AZT is very interesting in its own right, Barnes J makes a fair point in doubting whether the effect of Justice LeBel’s comments in Viagra was to overrule the FCA’s line of authority on this point. With both Rennie JA and Gauthier JA now on the FCA, this issue will no doubt be authoritatively decided at that level in due course.

Having accepted the established FCA case law, Barnes J held that Lilly could not rely on in house testing or a line of reasoning not found in the patent in order to establish a sound prediction of antitumour activity [51]. He noted that Lilly’s expert “based his opinion of a sound prediction of utility substantially on data that was not disclosed in the Patent” [53], and also that the patent “provides no line of reasoning from which the person of skill could draw a prima facia reasonable inference that the thousands of untested claimed compounds would be useful as antitumor agents in vivo or even in vitro” [51], or that would allow an inference of in vivo activity to be extrapolated from the reported in vitro data [52]. These “fundamental flaws in Lilly’s case” [54] would have sufficed to dispose of the case on the law as set out by Barnes J, but he nonetheless went on to address the evidence relied on by Lilly [54]. After reviewing the evidence of Lilly’s main expert on utility, including evidence not found in the patent (eg [65]), he concluded that “I do not agree with Lilly that a person of skill would have made a prediction of utility for the thousands of untested compounds included in the asserted claims. This is equally the case if one accepts Lilly’s assertion of the promise of the subject claims as being merely some antifolate activity in some cell line in vitro” [116] (and see similarly [108]). This indicates that Barnes J would have reached the conclusion that the patent is invalid even if he assessed utility against the standard proposed by Lilly and in light of all the evidence presented by Lilly.

EWCA Requires Apportionment in Accounting of Profits

See here for Professor Tom Cotter’s discussion of the recent EWCA decision on accounting of profits in Design & Display Ltd v Ooo Abbott & Anor [2016] EWCA Civ 95. I won’t be blogging on this aspect of the case myself. While it is good to see the EWCA recognizing the need for apportionment profits between patented and unpatented features of an infringing product, the English courts are still hampered by unfortunate legacy of United Horse-Shoe & Nail Co v John Stewart & Co. (1888), 5 RPC 260 (HL), and have not fully embraced the importance of non-infringing alternatives to an accounting of profits which was recognized by the SCC in Schmeiser 2004 SCC 34, [102]. Consequently, English analysis of apportionment remains unstructured, and their case law on this issue will remain of limited interest to Canadian law unless and until the English courts adopt the more rigorous and conceptually sound Canadian methodology.

The EWCA also discussed at some length the difficult question of whether to allow an infringer to deduct some part of its fixed costs (such as general overhead or rent) from the profits to be disgorged. That issue has also arisen in several Canadian cases, The EWCA discussion is interesting at first read, and Professor Cotter is of the view that the court “got this point right,” but I wonder if the analysis might be hampered by the fact that the court has not fully embraced the non-infringing alternative analysis. I will blog on this aspect of the case after I’ve had a chance to review it more carefully.

No Presumption Against an Accounting of Profits

Philip Morris Products S.A. v. Marlboro Canada Limited 2016 FCA 55 Trudel, Scott, Boivin JJA aff’g 2015 FC 364 de Montigny J

This issue in this decision is whether the trademark owners who had prevailed in their infringement action should be entitled to elect an accounting of profits. While it is a trademark case, it is directly relevant to the same question in the patent context, both as a matter of principle and because the parties and the courts considered the patent case law. As discussed here, de Montigny J’s decision was noteworthy for its extensive review of the factors to be considered in deciding whether to allow a successful party to elect an accounting. Since the decision to award an accounting is discretionary, the standard of review is deferential and the FCA has affirmed on the basis that the appellants had not demonstrated any error sufficient to warrant intervention [23]. With that said, the FCA’s comments were broadly approving of de Montigny J’s analysis.

The most general issue raised is whether there is a presumptive entitlement to an accounting. That is, will a successful IP owner normally be permitted to elect an accounting unless there is some reason why that remedy should be denied; or will an accounting be denied unless the plaintiff can show some positive reason why it should be granted? As discussed in my post on Phelan J’s decision in Varco v Pason 2013 FC 75, there had been something of a split in the FC cases on this point. This case is the first time the question has been directly raised in the Court of Appeal. Relying on Hughes J’s decision in Janssen [2006] FC 1234, which indicated that an accounting would presumptively be denied, “the appellants claim that the onus was on the respondents to show their entitlement to the accounting of profits by establishing a causal link between the damages suffered and the use of their property by the appellants” [15]. The FCA rejected this argument, on two grounds. First, “it is clear that a causal link has been established since this Court has determined that there was confusion and infringement, which is the source of the appellants’ unjust enrichment” [17]. I don’t want to parse this too finely, but this could be taken to indicate either that the causal link will be established in any IP case in which the plaintiff was successful; or at least any case in which the plaintiff suffered lost profits, though perhaps not in a case in which the plaintiff would only have been entitled to a reasonable royalty had it elected damages. Secondly, the FCA noted that “the statement in Janssen on which the appellants rely stands alone in the jurisprudence and is not supported by any prior case law” [18]. This is not quite the same thing as saying there is a presumptive entitlement to an accounting, but it does at least mean that there is no presumption against an accounting.

The appellants had also argued that de Montigny J had failed to consider the restitutionary purpose of an accounting. The FCA rejected this. The court noted that de Montigny J had clearly turned his mind to the restitutionary purpose [9], and moreover, the FCA indicated, correctly in my view, that Strother 2007 SCC 24 did not present a test requiring an accounting be granted solely for a restitutionary purpose [7]. Strother [75] noted that a disgorgement of profits “may be directed to either or both of two equitable purposes" (my emphasis), namely a prophylactic (deterrent) purpose or a restitutionary purpose, and as noted by Zinn J in Monsanto v Rivett, 2009 FC 317, [20] discussed here, “It is not necessary that both purposes be served in every case” [20]. I might add that in Strother the SCC gave the example of “wrongful exploitation by the defendant of the plaintiff’s intellectual property” [76] as a situation where the restitutionary rationale would be engaged, so a singular focus on restitution would not in any event militate against awarding an accounting to a successful IP owner.

The FCA also approved de Montigny J’s analysis of the question of the complexity of an accounting [14]. As discussed in my post on de Montigny J’s decision, this point is significant because the accounting remedy was rejected in US law because of the putative difficulty of carrying out an accounting, though this was at a time when the accounting remedy was not assessed on the same basis as it now is in Canadian law.

No New Cases for the Week of 15 February

No new patent / NOC / data protection cases were released for the week of 15 February 2016.

Failure to Pay the Large Entity Fee Does Not Invalidate a Granted Patent

Apotex Inc v Pfizer Inc 2016 FC 136 Diner J
            1,339,132 / latanoprost / XALATAN

Pharmacia Aktiebolag (Pfizer’s predecessor) paid a small-entity final fee prior to issuance of the 132 patent, when it should have paid the large entity fee [16]. Nor did it top-up the payment during the grace period provided by 78.6(1) [40]. This motion consequently addressed a single legal issue: does failure to pay the proper fee invalidate the granted patent? Diner J held that it does not.

The main authority relied on by Apotex to argue that the patent was invalid was Dutch Industries FCA 2003 FCA 121 var’g [2002] 1 FCR 325. Dutch Industries involved an application (904) and an issued patent (388) for which small entity fees had been paid, and the Commissioner had subsequently accepted large entity fees as a top-up after statutory deadlines had passed. The Federal Court held that the Commissioner did not have the authority to accept late payment and remanded to the Commissioner for redetermination on that basis, with the implication that the 904 application was abandoned and the 388 patent lapsed [FC 54]. The FCA affirmed that “the Commissioner lacks the authority to permit a deficient maintenance fee to be topped up after the date upon which the fee was due” [26] (though with some apparent criticism of the complexity of the regime and the harshness of the result [3]-[4]). However, the FCA held that the patentee was in fact a small entity at the time the patent was granted, and that status did not change, so the 388 patent was not invalid [47], though the 904 application was deemed to be abandoned because the patentee was a large entity while it was still pending [48]. Evidently as a response to Dutch Industries, 78.6(1) was enacted, providing for a grace period for top-up payments.

Pfizer relied primarily on Weatherford 2011 FCA 228, in which the court held that non-compliance with 73(1)(a) of the Act (requiring an applicant to reply in good faith to a requisition) cannot result in invalidation of a granted patent: “To be clear, the concept of abandonment in paragraph 73(1)(a) operates during the prosecution of the application for a patent. Its operation is extinguished once the patent issues” [150]. The FCA emphasized that “The jurisprudence distinguishes between an “application for a patent” and a “patent” and considers the issuance of the patent to be a demarcation point,” [145], and post-grant invalidation for misrepresentations is left to s 53(1) [149].

Diner J held that to the extent that there was any inconsistency between Weatherford and Dutch Industries, Weatherford was to be followed as clarifying the prior case law [66]. Moreover, Diner J recognized the force of the law and policy reflected in the Weatherford decision. In addition to relying on Weatherford itself, he reviewed the case law emphasizing the long-standing distinction between the application and post-grant status of patents [71], [77], [81]. As a matter of policy, Diner J emphasized the distinction between the substantive patent bargain – the patentee provides an invention which is in fact new, useful, inventive and properly disclosed in return for a limited period of exclusive rights [82] [86] – and administrative consdierations, aimed at the operation of CIPO and clearing the system of deadwood [83], [88]:

[87] Indeed, the non-compliance of a patent holder will either be rooted in administrative or substantive breaches of the statute. It is consequently the type of non-compliance that will ultimately determine whether the breach invalidates the patent: does the breach go to the substantive heart of the patent bargain, or rather administrative dealings with the Patent Office, such as fee for service payments? Breaches which go to the heart of the patent, namely those which require the inventor to pay the figurative hard coinage, can be fatal to issued patents. [original emphasis]

While Weatherford dealt with 73(1)(a), and the requirement to pay prescribed fees is found in 73(1)(f), Diner J noted that “[i]f one paragraph of a given section cannot invalidate an issued patent, the others cannot do so either, without some express direction otherwise” [74].

Diner J's reasoning strikes me as entirely persuasive, with a couple of caveats. 

One caveat is that the FCA in Weatherford distinguished Dutch Industries on the basis that “Canadian Patent Application No. 2,146,904 was deemed abandoned. No patent regarding that application had issued” [151]. While that is true, the FCA made no mention of the 388 patent; while that was granted, the FCA in Dutch Industries was clearly of the view that the same principle would have applied. It seems to me that there is actually a conflict between the two cases, even if Dutch Industries can be formally distinguished on the basis that no granted patent was held invalid. With that said, Weatherford is both more recent and substantively preferable, in my view, and in any event, regardless of how persuasive the distinction might be, it was the FCA's explanation of its own prior decision, and Diner J was certainly entitled to rely on it. An unpersuasive distinction is a way of over-ruling a prior decision sotto voce.

Another caveat is that there appears to be no sanction for failure to pay the top-up fees within the grace period. It might be suggested that in responding to Dutch Industries with the grace period in 78.6(1), the legislature was implicitly affirming that if the top-up payments were not made within that grace period the Dutch Industries rule would still apply. I don’t think this argument is strong enough to counter the Weatherford reasoning, but it does seem to me that the whole matter would be clarified if the act would provide an administrative penalty, such as triple fees, for an administrative failure. Any law that provides that provides a sanction that is disproportionate to the offence will make for an unsatisfactory jurisprudence.

Failure to Disclosure Status as Public Servant Not Material for Purposes of s 53

Brown v Canada 2016 FCA 37 Boivin JA: Webb, de Montigny JJA rev’g 2014 FC 831 Kane J

2,285,748

Mr Brown was a member of the Canadian Forces Supplementary Reserve when he filed his application for the 748 patent. The patent related to technology used for decontamination and containment of biological and chemical hazards, which has military applications [9]-[10]. After the firm started by Mr Brown failed to win a contract with Public Works to supply related technology, Mr Brown launched infringement proceedings against the Crown and the winning bidder. The Crown defended by bringing a motion for summary judgement on the basis that (a) Mr Brown was a “public servant” as defined by s 2 of the Public Servants Inventions Act, and as such he was required by s 4(1)(c) of that Act to disclose that he is a public servant in his patent application; and (b) Mr Brown’s failure to make such a disclosure was an untrue material allegation which invalidated the 748 patent pursuant to s 53 of the Patent Act. In the Federal Court, Kane J held that Mr Brown was a public servant, and that the failure to make that disclosure was an untrue material allegation, but whether it was wilfully made for the purpose of misleading was a matter for trial. On appeal, the FCA held that Mr Brown was indeed a public servant, but the failure to disclose was not material to the Patent Act.

On the first issue, the FCA held that “for the purpose of the PSIA, all members of the Canadian Forces are ‘public servants’ whether they are in the Regular Force or the Reserve Force” [27]. While the English version of s 2 is somewhat ambiguous, saying that a public servant means an employee “and includes” a member of the Canadian Forces, the French version of s 2 is perfectly clear that public servant means an employee and a member of the Forces [25].

On the second issue, the FCA held that there was an “apparent conflict and lack of consistency” between the forms and regulations under the PSIA and the Patent Act, in that the former require disclosure of the public servant status and the latter do not. The FCA concluded that the Patent Act prevails and hence there was no requirement on the Patent Act for the applicant to disclose their status a public servant [45]. Moreover, even apart from this inconsistency, a reading of the two Acts together supports the conclusion that Parliament did not intend that a patent could be void for a failure to disclose public servant status [46], as penalties for failure to make that disclosure are provided by s 4(1) of the PSIA [48]. This second point strikes me as entirely compelling. Indeed, the contrary conclusion would be perverse. The purpose of the PSIA is to vest in the Crown inventions that are made by public servants: s 3. If the position advanced by the Crown was correct, then any public servant inventor could unilaterally deprive the Crown of a valid patent to which the Crown was entitled by law, simply by failing to disclose their status as a public servant. Yes, the sanction of invalidity would provide an incentive to disclose, but not a very strong one, since the inventor would not be entitled to the invention either way: if the inventor didn’t disclose, the inventor would run the risk that the patent would be held invalid, and if the inventor did disclose, the inventor would run the risk that the patent would be vested in the Crown. And in any event, the sanction of invalidity puts the victim and the wrongdoer together in front of the firing squad. The offences of s 11 of the PSIA, which are target the public servant, are a far more sensible sanction. I can’t help but think that there was a failure of communication between the Crown’s litigation team and those responsible for longer term policy.

$2.9 Million Award Is 30% of Actual Legal Fees

Dow Chemical Co v NOVA Chemicals Corp 2016 FC 91 O'Keefe J here
            2,160,705 / film-grade polymers / ELITE SURPASS

I don’t normally blog on procedural issues, but I’ve made a partial exception for costs because of the interesting disparity between the Federal Court tariff and the actual costs of patent litigation. Awards for fees in the range of 10% of actual fees, which is not uncommon if the tariff is applied, are effectively a hybrid between the English rule (substantial costs in the cause) and the American rule (each party bears their own costs), which strikes me as the worst of both worlds: big enough to fight over (thus increasing costs), but not big enough to make any difference to litigation strategy. We have seen the courts gradually move from Column III of the tariff to Column IV or V in complex patent cases (see here for a review of the trends), but even that is often not enough to make a real difference: in this case fees assessed under Column V would amount to only 11% of actual legal fees. Even if “an award of costs represents a compromise between compensating a successful party and not unduly burdening an unsuccessful party” [10, quoting 2011 FC 1113 [11]], 11% is a distraction rather than a compromise.

O’Keefe J held that costs awarded pursuant to Column V of the tariff “would be totally inadequate as an amount of costs for the plaintiffs in this case. To only recoup 11% of your costs in such a complex case is not acceptable” [26]. Accordingly he exercised his discretion to depart from the tariff and award lump sum costs for legal fees in the amount of $2.9 million, which is
approximately 30% of the actual legal fees [29], for a total award, including disbursements, of $6.5 million [36].

It seems to me that this award of 30% of fees is entering the range where it is reasonable to view the award as actually being a compromise between the English and American rules. I don’t have an opinion as to whether such a compromise is better than the applying a pure version of either of the alternatives, but at least it is a substantive alternative, as opposed to the fee structure of the tariffs, which increasingly appears to reflect no principle other than historical accident. It will be very interesting to see what emerges from the discussion paper on costs that was issued by the Rules Committee.

Section 52 Allows Correction of Ownership

Gray Manufacturing Company, Inc. v. Canada (Attorney General) 2016 FC 55 Shore J
            2,406,340

This was an uncontested application under s 52 of the Act, which gives the Federal Court broad jurisdiction to vary or expunge Patent Office records related to the title to the patent, to correct the ownership of the patent. The inventor had intended to assign his rights in the invention to Gray Automotive Products Co., but the assignment document (which was attached to the patent application) inadvertently specified Gray Automotive Products, Inc., and the Patent Office consequently registered it against that name [4]. The mistake was unintentional, made in good faith, and, was made without any attempt to mislead or cause delay [10]. Shore J held that the broad jurisdiction conferred by s 52 includes the power to vary errors relating to the ownership of a patent [9] and he ordered the appropriate correction.

For a slightly more extended discussion of s 52, see here.

Update: Here is an interesting note by Ken Bousfield describing Gray Manufacturing as symptomatic of a secular shift in CIPO's attitude towards clerical errors.

Inequitable Conduct by Patentee: Defence v Reduction of Damages

Alcon Canada Inc v Actavis Pharma Co 2015 FC 1323 Locke J
            2,447,924 / olopatadine solution / PATADAY

As a partial defence to Alcon’s infringement action, Actavis alleged that Alcon engaged in inequitable conduct. This pleading has survived a motion to strike, and Locke J’s decision is interesting both on the substantive issue and for his thorough analysis of the case law relating to the standard of review of the Prothonotary’s decision.

The ‘924 patent covers a formulation of 0.2% olopatadine, as found in Alcon’s PATADAY. Actavis alleged that Alcon conspired, in breach of the Competition Act, to ensure that Actavis could not sell its non-infringing 0.1% olopatadine product, and this inequitable conduct by Alcon should partially offset any damages resulting from Actavis’s (alleged) infringement [5]. (The exact nature of the conduct was not specified – perhaps product hopping?) It was this pleading that was the subject of the motion to strike.

This is an intriguing argument, which I discuss in more detail below, but Locke J first had to deal with the almost equally complex question of the standard of review to be applied to the Prothonotary’s decision.

Under Aqua-Gem [1993] 2 FC 425 discretionary orders of prothonotaries ought not to be disturbed on appeal to a judge unless [8]:

a. they are clearly wrong, in the sense that the exercise of discretion by the prothonotary was based upon a wrong principle or upon a misapprehension of the facts, or

b. they raise questions vital to the final issue of the case.

If the prothonotary refuses to strike a pleading, can this ever be vital to the final issue? After all, if the pleading stands, the result of the motion will never be determinative of the outcome; but on the other hand, a motion on a central issue might reasonably be said to be “vital”. As Locke J put it, “If one focuses on what was sought in Alcon’s motion, it is final. However, if one focuses on the result of the motion, it is interlocutory” [12, original emphasis].

Locke J reviewed the case law on this issue, noting an apparent split within the Federal Court [18], and concluded that the proper question is whether what was sought was vital [19]. This means that even a refusal to strike might in principle be “vital” to a final issue.

What, then, is meant by “vital”? Again Locke J thoroughly reviewed the case law. He concluded that the question is whether “the paragraphs that Alcon seeks to have struck in the present case are more in the nature of ‘isolated allegations’ or rather ‘important or central allegations’” [24]. On the particular pleadings at issue, Locke J held that the paragraphs Alcon sought to have struck were isolated allegations not vital to the case [26]. Consequently, a deferential standard of review should be applied; the order of the prothonotary should not be disturbed unless it is “clearly wrong” [27].

Locke J then turned to the second branch of the conjunctive Aqua-Gem test: was the refusal to strike “clearly wrong”? On the substantive point, Alcon relied on Sanofi FCA 2008 FCA 175 [16], [18], where the FCA said that “a party claiming equitable relief will not be disentitled to that relief by virtue of inappropriate conduct on its part unless that conduct relates directly to the subject matter of that party's claim and the equitable relief sought,” and in a patent case this means that the alleged conduction must “cast a shadow” over the patent rights themselves, or the question of whether infringement occurred [29]. It was not disputed that the conduct alleged in this case did not do either of these things [30], and so Alcon argued that the pleading must be struck.

Locke J rejected this, saying that the Sanofi test was only applicable to equitable relief, and the allegations in this case concerned damages [32]. On its face, this makes sense. Equitable relief is discretionary, and inequitable conduct or “unclean hands” is one factor that a court may take into account in exercising its discretion. Damages are as of right, and without any discretion to be exercised, so unclean hands are not relevant. Ex turpi causa might still be relevant, as a rule of law, but the bar is probably substantially higher than unclean hands, at least according to the UKSC in Servier v Apotex [2014] UKSC 55, though see here suggesting that simple illegality is enough. Ex tupri causa was not raised in this case, as Actavis alleged only “inequitable conduct.”

But a holding based on the distinction between law and equity tends to seem formalistic, particularly when parallel doctrines such as unclean hands and ex turpi causa are available. Actavis clearly raised an allegation of contravention of the Competition Act, and it would be unsatisfactory if the whether pleading stood turned on whether it used the words “unclean hands” or “ex turpi causa.” Similarly, Locke J’s holding on this point implies that if Alcon had sought an accounting of profits, Actavis’ defence would have been struck. It is not evident why unclean hands should bar one monetary remedy but not another, and to say one remedy is legal while the other is equitable is a formalistic answer.

Locke J gave another reason for allowing the pleading to stand which I find more satisfactory. He noted that [37, my emphasis]:

Actavis has indicated that its allegations in issue are not intended to deny Alcon damages for infringement simply because Alcon engaged in the alleged inequitable conduct. Rather, Actavis’ allegations seek to reduce (or eliminate) those damages to reflect the effect of any improperly increased sales of Alcon’s patented product.

There is an important distinction between reducing damages and raising a complete defence. As the UKSC said in Servier, [13] “The doctrine [of ex turpi causa] necessarily operates harshly in some cases, for it is relevant only to bar claims which would otherwise have succeeded. For this reason it is in the nature of things bound to confer capricious benefits on defendants some of whom have little to be said for them in the way of merits, legal or otherwise.” Denying a claim entirely may be disproportionate to the wrong, unless the wrong is very serious, which is largely why the USKSC set a high bar for what constitutes “turpitude.” The same logic applies equally in the case of equitable remedies – in a way, even more so, since it is hardly equitable to deny a patentee’s claim entirely as a punishment for a relatively minor fault. That reasoning is consistent with the caselaw holding that inequitable conduct will only be allowed to stand as a defence if it casts a shadow on the title to the patent. That is a high bar, and it would be wrong to allow any recovery if the patentee would not have a patent at all but for its wrongful conduct.

But if the patentee has indeed committed some wrong that is related to its claim, neither is it appropriate to ignore that wrong entirely. The answer lies in the damages calculation. As I said in my post on Servier, “Instead of using the blunt hammer of ex turpi causa, the tension should be resolved with the finer sword of damages.”

In this case, Actavis’ argument can be cast in terms of “but for” causation. Actavis in effect alleged that Alcon had wrongly increased its sales of its PATADAY product at the expense of Actavis’ non-infringing product, and to the extent that Actavis’ infringing sales captured some part of the PATADAY sales that Alcon would not have obtained but for its wrongful conduct (because the sales would have been captured by Actavis’ non-infringing product), Alcon should not be able to recover damages in respect of those sales [6]. In constructing the “but for” world for the purpose of assessing damages caused by the infringement, the infringer is assumed to have acted properly, either by avoiding infringement or taking a licence. The question is whether, in constructing the but for world, we should also assume that the patentee acted properly, by not breaching the Competition Act, or avoiding whatever other wrong is alleged. When the wrong is independently actionable, as was the case in Servier (infringement in Canada, raised as defence to an undertaking in damages in respect of UK sales), or under s 45 of the Competition Act, as alleged in this case, there is a judicial economy argument for saying that all parties should be assumed to have acted properly, so as to avoid the need for a separate action. This is particularly so when the evidence relevant to the remedy in both cases is related. On the other hand, when the wrong is not independently actionable, as with the allegations in this case based on ss 75, 76 and 78 of the Competition Act, the question is more difficult, as taking into account the patentee’s wrong would effectively give the infringer a private remedy that it would not otherwise have had, but refusing to take it into account would allow the patentee to compound the harm done by its wrongful conduct.

This analysis is largely consistent with the prior cases. In Procter & Gamble (1990), 29 CPR(3d) 545 (FCA) the allegation was predatory pricing which harmed the defendant, and so might have been relevant to quantum of damages; but it was pleaded as a complete defence, and the pleading was struck. In Visx (1994), 58 CPR(3d) 51 (FCTD) the allegation was that the patentee had made unjustified allegations of infringement against third parties, so it would not even have been relevant to quantum, and it was pleaded as a complete defence. The pleading was struck. Volkswagen [2001] 3 FC 311 (FCA) is a bit different. It was a grey marketing case in which VW pursued the grey marketer for copyright infringement. The allegation was that VW’s actions in seeking to prevent grey marketing were a restraint of trade in breach of the Competition Act, and the pleading was allowed to stand as a complete defence. The FCA distinguished Visx and Procter & Gamble on the view that “it is at least arguable that in this case there is a sufficient relationship between the copyright and the unclean hands defence that the equitable remedy might not be granted.” In my view there is a more direct distinction. If the copyright owner’s rights are exhausted by the authorized foreign sale, which was the essence of the defendant’s pleading, then this would indeed serve as a complete defence, so there is nothing wrong with allowing it to stand as such.

Role of Product Monograph in Inducing Infringement

Bayer Inc. v. Pharmaceutical Partners of Canada Inc. / moxifloxacin (NOC) 2015 FC 797 Strickland J aff’d 2016 FCA 13 Stratas JA (sub nom Bayer Inc v Fresenius Kabi Canada Ltd) aff’g 2015 FC 388 Lafrenière J
            2,378,424 / moxifloxacin / AVELOX IV

In Wednesday’s post I noted that it was difficult to put FCA’s holding in this case in context, without the benefit of Strickland J’s FC decision. Today, the court has belatedly released Strickand J’s decision, which is indeed very helpful.

As outlined in my previous post, the ‘424 patent is a formulation patent claiming an aqueous formulation of moxifloxacin and from 0.4% to 0.9% (w/v) of sodium chloride [6]. The moxifloxacin for injection product for which PPC (since rebranded to Fresenius Kabi Canada) was seeking an NOC is capable of being used post-sale to make the formulation, though it can also be used for non-infringing uses. In the motion giving rise to this appeal, Lafrenière J struck the portions of Bayer’s application for an order of prohibition alleging infringement or inducing the infringement of the ‘424 patent. Only the inducement issue was appealed [4].

As discussed at length in my post on Lafrenière J’s decision, the law of inducement raises some very difficult issues in a case such as this one where the allegedly infringing product is capable of both infringing and non-infringing uses. On the one hand, the public should not be denied the benefit of competition for non-infringing uses, but on the other hand, the patentee should be able to effectively enforce its patent rights. Because of the first consideration, if a product is capable of substantial non-infringing use, the mere fact that it can also be put to an infringing use, or even that it will inevitably be put to an infringing use in some instances, is not sufficient to establish infringement. As the FCA explained in AB Hassle v Apotex / omeprazole, 2002 FCA 421:

[57] Thus Apotex cannot be prevented from obtaining a NOC solely on the basis that it will sell omeprazole. If it were otherwise, then serious policy issues would arise. If there was any likelihood that a patient would consume a generic product for a patented use, then the generic product would not be approved. This would prevent new uses from being approved for existing drugs because there is always the possibility that someone somewhere will use the drug for the prohibited, patented purpose. This would result in a real injustice: since a generic company cannot possibly control how everyone in the world uses its product, the prevention of the generic from marketing the product would further fortify and artificially extend the monopoly held by the patent holders. The patent holder would, therefore, effectively control not just the new uses for the old compound, but the compound itself, even though the compound itself is not protected by the patent in the first place. The patent holders, as a result, would obtain a benefit they were not meant to have. In the end, society would be deprived of the benefit of new methods of using existing pharmaceutical medicines at a lower cost.

For this reason, even though the generic’s sale of its product might inevitably result in direct infringement by another party, “something more” is required to establish that the generic has induced infringement [49]. Under the second branch of the test in Corlac v Weatherford 2011 FCA 228, [162], there must be some act by the accused inducer which can be said to be the cause the direct infringement. That act may consist of instructions accompanying the product which direct or instruct the purchaser to use the product in an infringing manner, as with the instruction manual included in the package of parts shipped to the purchaser in Windsurfing, which instructed the purchaser to do only one thing with the enclosed parts, namely to assemble them into an infringing windsurfer.

It is now well established in Canadian law that product instructions can constitute the necessary act of inducement, as in Windsurfing, where the sole and inevitable result of carrying out the enclosed instructions was to construct an infringing windsurfer. But in less extreme cases, where the product has substantial non-infringing uses and the directions are more equivocal, the question as to whether the instructions constitute inducement is fact specific.

In the pharmaceutical context, the product monograph corresponds to the product instructions more generally, and it may suffice to establish inducement: 2007 FCA 167, [11]. But whether a particular monograph does actually constitute inducement is a matter of fact, and there is no bright line rule. Even “subtle” references in a monograph may cumulatively establish inducement, as in Genpharm 2003 FC 1443 [155] aff'd 2004 FCA 413; and see also Abbott Laboratories 2006 FC 1411 aff’d 2007 FCA 251. But on the other hand “an inducement to infringe generally cannot be inferred from a mere reference to the new use in the product monograph, for example, in the course of explaining contraindications or drug interactions, or as part of a list of scientific references” Sanofi-Aventis v Novopharm 2007 FCA 167 [11] rev’g 2006 FC 1547; and see also Lundbeck v Ratiopharm 2009 FC 1102.

In this case, the key passage was one in which the product monograph described PPC’s moxifloxacin injection product as being “compatible” with six different intravenous solutions, one of which, sodium chloride, would have resulting in an infringing formulation:

Moxifloxacin injection is compatible with the following intravenous solutions at ratios from 1:10 to 10:1:

•→0.9% Sodium Chloride Injection, USP

•→IM Sodium Chloride Injection

•→5% Dextrose Injection, USP

•→Sterile Water for Injection, USP

•→10% Dextrose for Injection, USP

•→Lactated Ringer’s for Injection

Strickland J held that “the PPC Product Monograph does not direct nor does it instruct the co-administration of PPC-Moxifloxacin with 0.9% sodium chloride. It merely identifies that it is compatible with that solution” [61] (and see also [65]), and this therefore did not rise to inducement. Strickland J distinguished Genpharm and Abbott Laboratories on the facts.

While it is always difficult to compare different factual situations, in my view, Strickland J’s finding is consistent with the prior case law. The product monographs in Genpharm and Abbott Laboratories went further toward encouraging or instructing the infringing use, and the statement in this case was closer the passing references disparaged in statements in Sanofi-Aventis.

We now have a number of cases assessing inducement by statements in the product monograph, and it seems to me that on the whole the law is reasonably coherent and consistent, though fact-specific. Statements in a product monograph may suffice to establish inducement, but not any reference to an infringing use will suffice; the references in the product monograph must pass a threshold before they was be sufficient on their own to establish inducement. While there is no specific verbal formulation for that threshold, the cases strike me as being reasonably consistent in that statements that have been held to establish inducement have pointed more strongly to the infringing use that those where the inducement argument has failed.

On a final point, Strickland J made the following remarks almost in passing (my emphasis):

[65] Bayer has also submitted that PPC should have refrained from including 0.9% sodium chloride in the PPC Product Monograph. However, as seen from the above, Dr. Dresser’s Affidavit clearly states that the list of compatibilities with other drugs or solutions “is required to be set out in the Product Monograph” (Dresser Affidavit at para 12). Therefore, omitting this information was not an option open to PPC. Nor do I view the stating of this necessary information as encouraging or directing infringement.

If it is true that the impugned statement is required for marketing authorization, this strikes me as a very strong argument in favour of saying there is no inducement. The central problem of the law of inducement is to ensure that the public is not deprived of the product for the non-infringing uses. If the statement that is relied on as establishing inducement must be included for the product to be sold, then a finding of inducement would mean that the public would necessarily be deprived entirely of the non-infringing uses. In such a case, there is a strong argument that it is better to leave the patentee to its remedy in direct infringement, or to require it to establish inducement by other facts, such as direct marketing.

On the Facts, Product Monograph Does Not Induce Infringement

Bayer Inc v Fresenius Kabi Canada Ltd / moxifloxacin (NOC) 2016 FCA 13 Stratas JA, aff’g 2015 FC 797 Strickland J aff’g 2015 FC 388 Lafrenière J (here) (sub nom Bayer Inc v Pharmaceutical Partners of Canada Inc)
            2,378,424 / moxifloxacin / AVELOX

The ‘424 patent is a formulation patent claiming an aqueous formulation of moxifloxacin and from 0.4% to 0.9% (w/v) of sodium chloride. Fresenius Kabi’s moxifloxacin product is capable of being used post-sale to make the formulation, though it can also be used for non-infringing uses. In the motion giving rise to this appeal, Lafrenière J struck the portions of Bayer’s application for an order of prohibition alleging infringement or inducing the infringement of the ‘424 patent. Only the inducement issue was appealed. While Strickland J’s decision does not appear to be publicly available, we are told that “the Federal Court reached the same result as the Prothonotary for substantially the same reasons” [3]. As discussed at length in my post on Lafrenière J’s decision, the law of inducement raises some very difficult issues, particularly in a case such as this one, where the allegedly infringing product is capable of both infringing and non-infringing uses.

While the law on inducement is complex, those complexities are not necessarily raised on the facts of any particular case. In my post on Lafrenière J’s decision I pointed to the statement in the Product Monograph that “Moxifloxacin injection is compatible with the following intravenous solutions at ratios from 1:10 to 10:1: [including] 0.9% Sodium Chloride Injection, USP,” saying that “As I understand the facts, the first use would be infringing, though the following five would not.” But reading a decision is not the same thing as reading the full record, and in this case the FCA stated that the FC “found as a factual matter that the product monograph in question does not instruct or direct that Fresenius’ product is to be co-administered or co-administered with 0.9% sodium chloride (at paragraphs 59-61).” That being the case, the appeal was dismissed. This would seem to imply that a statement on a Product Monograph that a product can be used for an infringing purpose does not in itself constitute “instruction or direction” and therefore cannot constitute inducement. However, without Strickland J’s decision, it is difficult to put this holding in context.

Stratas JA also discussed the standard of review. He noted that on the authority of Housen 2002 SCC 33, the appropriate standard of review would be palpable and overriding error, but Federal Court precedent is that the standard of review is different in an appeal from a Rule 51 appeal; the FCA “may interfere with the Federal Court’s decision where the Federal Court had no grounds to interfere with the Prothonotary’s decision or, in the event such grounds existed, if the decision of the Federal Court was arrived at on a wrong basis or was plainly wrong” [6]. Stratas JA strongly suggested that the time has come to abandon this different standard of review and apply the Housen standard [7], but given that he had not received full argument on that issue, the lower standard would be applied, and in any event the standard of review made no difference in the result [8]. This is a clear invitation to argue that the Housen standard should apply in an appeal from a Rule 51 appeal.

UPDATE: Strickland J's FC decision has now been released: see here.

Siebrasse & Cotter on Judicial Determinations of FRAND Royalties

Tom Cotter and I have just posted on SSRN a draft of a paper titled Judicial Determinations of FRAND Royalties, which will be a chapter in the forthcoming Cambridge Handbook of Technical Standardization Law (Jorge L. Contreras ed., Cambridge University Press). Here is the abstract:

This chapter from the forthcoming Cambridge Handbook of Technical Standardization Law reviews the principles and methodologies courts have used for calculating royalties for the infringement of standard-essential patents (SEPs) that the owner is obligated to license on fair, reasonable and non-discriminatory (FRAND) terms. As we show, the decisions thus far -- including the U.S. decisions in Microsoft, Innovatio, Ericsson, and CSIRO, the Japanese Apple v. Samsung judgment, and Chinese Huawei v. InterDigital matter -- have tended to focus on a relatively small number of additional considerations beyond the generally applicable principles used for calculating reasonable royalties. Although reasonable minds may disagree with specific features of the relevant decisions, overall the courts (correctly, in our view) have emphasized that the owner of an SEP should receive a royalty that is proportionate to the technology’s contribution to the value of standard—a principle which, when properly applied, reduces concerns over the potential for SEPs to induce holdup and royalty stacking.

Comments welcome.

No New Cases Released over the Holidays

No new patent / NOC / data protection cases were released over the holiday break. Keep in mind that I do not normally blog on procedural cases. To keep up with all IP cases, I recommend Alan Macek's IPPractice Daily IP News service.

A New Framework for Determining Reasonable Royalties

Tom Cotter and I have posted on ssrn a revised version of our paper A New Framework for Determining Reasonable Royalties in Patent Litigation, which is forthcoming in the Florida Law Review. Here is the abstract:

Conventional analysis often assumes that there are only two theoretical options for calculating a reasonable royalty in patent disputes: a “pure ex ante” approach, under which a court reconstructs the hypothetical bargain the parties would have struck prior to infringement, based on the information available to them at that time; and a “pure ex post” approach, under which the court considers the bargain the parties might have reached as of some later date such as the date of judgment. The first approach avoids patent holdup — basing the royalty partly on the infringer's sunk costs — but cannot easily explain other longstanding features of how royalties are calculated, and can lead to awards that reflect the parties’ erroneous ex ante expectations. By contrast, the pure ex post approach uses more accurate information about the invention’s actual value, but it also enables the patentee to capture some of the patent’s ex post holdup value. In this Article, we show that a “contingent ex ante” framework, under which the court reconstructs the bargain the parties would have reached ex ante, based on all relevant information that is available ex post, is superior to both of the conventional approaches. More specifically, our framework enables courts to base the royalty on the most accurate information available of patent value while avoiding the holdup risk arising from the pure ex post approach. We analyze how courts can apply our approach in various settings, including cases involving SEPs, sequential infringement, regulatory uncertainty, and unexpected exogenous events.

Invalidity of Tadalafil Formulation Patent Upheld

Eli Lilly Canada Inc v Mylan Pharmaceuticals ULC (NOC) 2015 FCA 286 Dawson JA: Near, Boivin JJA 2015 FC 178 aff’g de Montigny J
            2,379,948 – Tadalafil formulation – CIALIS

In my post on de Montigny J’s Tadalafil formulation (NOC) decision, which held Lilly’s ‘948 patent to be invalid and not infringed, I noted that “The decision turned entirely on the facts. As counsel for Lilly stated at one point, ‘a lot of it just comes down to which expert the Court is going to go with’.” It is accordingly unsurprising that the FCA, in very brief reasons, has now affirmed “substantially for the reasons given by the Judge” [5]. The main legal ground of attack was that at one point de Montigny J had incorrectly articulated the “obvious to try” test, but the FCA held that on the whole it was clear that de Montigny J understood and applied the correct test, and so the error in his initial articulation of the test was immaterial [4].

Complete Code Bars Class Action for Recovery of Profits from to Invalid Patent

Low v Pfizer Canada Inc, 2015 BCCA 506 Garson JA: Bennett, Savage JJA rev’g 2014 BCSC 1469 Smith J (blogged here).
            2,163,446 / VIAGRA / sildenafil

In Low v Pfizer, the BCCA refused to certify a class action seeking disgorgement of the excess profits earned by Pfizer on sales of Viagra during the period when Pfizer’s market position was protected by a patent which was ultimately held to be invalid. The BCCA decision was based on three points: (1) the plaintiff was essentially seeking to create a tort of breach of statute, contrary to Saskatchewan Wheat Pool [1983] 1 SCR 205; (2) the patent regulatory regime is in any event complete code; (3) and the claims in unjust enrichment and unlawful interference with economic relations would fail on their own merits independently of the complete code argument. From a policy perspective, the BCCA was concerned about “tortifying” regulatory law and upsetting the complex balance of patent incentives that have been established by the legislature.

Pre-Amalgamation Settlement Agreement Does Not Bar Action by Amalgamated Entity

Pfizer Canada Inc v Teva Canada Ltd 2015 FCA 257 Gauthier JA: Webb, Near JJA
            2,163,446 / VIAGRA / sildenafil

In this decision the FCA held that a pre-amalgamation settlement agreement entered into by one of two subsequently amalgamated entities does not bar an action by the amalgamated entity based on pre-amalgamation events affecting the other entity.

In 2006-08, Teva (then Novopharm) and ratiopharm both filed ANDS for sildenafil. Pfizer sought orders of prohibition in respect of both under s 6 of the PM(NOC) Regulations. Pfizer and ratiopharm settled, and under the terms of the Agreement ratiopharm agreed not to launch until expiry of the patent. Teva and ratiopharm then amalgamated. The s 6 action against Teva proceeded, and Teva ultimately prevailed: Viagra 2012 SCC 60. The Minister granted an NOC in respect of Teva-sildenafil and Teva then brought a s 8 action for damages for having been keep out of the market by the NOC proceeding. Teva did not claim any damages relating to ratio-sildenafil, but only in respect of Teva-sildenafil. Pfizer brought a motion for summary judgment on the basis that Agreement entered into with ratiopharm barred the action by Teva. Pfizer acknowledged that when the Agreement was entered into, the parties did not intend to cover Teva’s product, but it argued that the scope of the Agreement changed as a result of the amalgamation [21]-[22]. Not very surprisingly, the FCA, affirming O’Keefe J, held that the Agreement only bars Teva from seeking s 8 damages in respect of ratio-sildenafil, and Teva's action in respect of Teva-sildenafil can proceed: [25].

Whether HAL HCl is an ester of ALA HCl is a Matter of Fact

Photocure ASA v Canada (Health) 2015 FC 959 Kane J
            hexaminolevulinate hydrochloride / CYSVIEW [aka HEXVIX]

In this application for judicial review Kane J declined to interfere with the Minister’s decision refusing to add Photocure’s drug CYSVIEW to the Register of Innovative Drugs. The key issue was whether the Minister’s decision involved matter of law or matter of fact. The case does not really raise any questions of general legal interest, though there was some suggestion by Kane J that whether the Minister’s interpretation of the Data Protection Regulations is to be reviewed on a correctness standard turns on the particular legal issue.

Is Minerals Separation Still Good Law?

Leo Pharma Inc v Teva Canada Ltd 2015 FC 1237 Locke J
            2,370,565 / calcipotriol & betamethasone / DOVOBET

In this NOC proceeding Locke J granted an order of prohibition as infringement of multiple claims was conceded, and he held that Teva’s allegations of obviousness, lack of utility and insufficiency were not justified [193]. The holding turned on the facts of the case, but the claim construction argument raises the question of the continued vitality of Minerals Separation.

The claimed invention is a dermal cream formulation for the treatment of psoriasis. Vitamin D and vitamin D analogues, specifically calcipotriol, were previously known for treatment of psoriasis, as were corticosteroids (such as betamethasone), and these were commonly used sequentially. There was consequently a motivation to develop a combined formulation, but the two drugs could not simply be mixed because they were pH incompatible, which is to say that calcipotriol was unstable at any pH value which was favourable to the stability of a corticosteroid, and vice versa [54], [55], [108]. Leo discovered a stable formulation containing these compounds plus the solvent POP-15. Claim 1 was to a formulation comprising vitamin D or a vitamin D analogue (component A), a corticosteroid (component B) and a solvent selected from a large class, while Claim 17 specified POP-15 as the solvent. (Claim 17 was the only claim held to be useful and infringed. The utility of the other infringed claims was not addressed.)

The patent itself disclosed that a formulation using propylene glycol as a solvent was unstable [19]. Teva argued that because the wording of the claims is non-exhaustive (using "comprising") and there is nothing in the claims to suggest that they are limited to compositions that are useful in treating psoriasis, the claim should therefore be construed as encompassing formulations with an additional  component, such as propylene glycol, which would not be useful [89]. More generally, if Teva’s argument were sound, any claim using “comprising” language would be invalid unless it was expressly limited to safe or effective formulations, as a claim not so limited would encompass the formulation plus Compound X, where Compound X is a poison.