Publication Date of Second Patent is Not the Date for Assessing Double Patenting

Mylan Pharmaceuticals ULC v Eli Lilly Canada Inc (NOC) 2016 FCA 119, Rennie JA, Trudel, Dawson JJA aff’g 2015 FC 17 de Montigny J
            2,226,784 / tadalafil / CIALIS

The main question addressed in this appeal was the date for assessing obviousness type double-patenting. Double patenting is a judicially created doctrine which prevents an inventor from obtaining a second patent for an invention which is an obvious variant of an invention disclosed in its own prior unpublished prior application, even though that prior application is not part of the state of the art defined in s 28.3. So, in Com'r of Patents v. Farbwerke Hoechst [1964] SCR 49, the SCC held that Hoechst’s application for a patent for a medicine consisting of sulphonyl urea diluted by a carrier should be rejected as not inventively distinct over Hoechst’s prior application for a patent for sulphonyl urea, given that there was no inventive step in mixing sulphonyl urea with a carrier.

If the state of the art does not change, then the date at which double patenting is assessed does not matter; in Hoechst it had always been common general knowledge that a medicine could be mixed with a carrier. But when the common general knowledge changes, the date is important. That is what happened in this case.

The question was whether Lilly’s ‘784 patent was invalid for obviousness-type double patenting over Lilly’s 2,181,377 patent. The ‘377 patent claimed tadalafil, which is a PDE V inhibitor. It had a priority date of 21 Jan 1994. The ‘784 patent claimed tadalafil for the treatment of erectile dysfunction (ED). It had a priority date of 14 July 1995. The publication date of the ‘784 patent was 6 Feb 1997. Between the first date and the last there were two new pieces of information available to the public. On 22 Dec 1994, Pfizer’s ‘902 US patent application was published, disclosing that sildenafil, another PDE V inhibitor, was useful for treating ED [6]. In June 1996 the Boolell study was published, which provided good evidence that a PDE V inhibitor could be administered orally for safe, effective treatment of ED [7]. The timeline was conveniently summarized by Rennie JA in this chart:


If the relevant date for assessing double patenting was the publication date of the‘784 patent, then it was uncontroversial that it would be obvious, because the ‘377 patent disclosed that tadalafil is a PDE V inhibitor and the Boolell paper disclosed that any PDE V inhibitor would be effective to treat ED [46].

The FCA rejected that date. Mylan had argued that Whirlpool 2000 SCC 67 mandated the use of the publication date of the later patent [15], presumably on the basis that Whirlpool [55] had held that the claims had to be construed as of the date of publication [55, 56]. Rennie JA held that Whirlpool was not controlling authority on this point, essentially on the basis that the question of the correct date was not at issue [48]. The refusal to decide the issue by exegesis of Whirlpool strikes me as sound both in law and as a matter of policy. In R v Henry, 2005 SCC 76 [57] the SCC pointed out that its dicta is to be treated as binding only when obviously “intended for guidance,” and “[t]he notion that each phrase in a judgment of this Court should be treated as if enacted in a statute is not supported by the cases and is inconsistent with the basic fundamental principle that the common law develops by experience.” It is better to rely on the considered reasoning of the FCA on the merits of the issue, rather than an attempt to discern what the SCC might have intended on an issue which it never addressed.

Turning to the merits, Rennie JA held that it would be inappropriate to use any date later than the claim date of the second patent because that would permit consideration of information arising after the patent’s claim date, contrary to s 28.3 [50]. For example, pretend the the ‘377 patent didn’t exist and suppose the Boolell paper was published in August of 1996, so that no one knew that PDE V inhibitors could be used to treat ED until then. If double patenting was assessed as of February 1997, the ‘784 patent would be held invalid for obviousness, even though on the claim date of the ‘784 patent it was not obvious to anyone that tadalafil could be used to treat ED – not even to someone with full knowledge that tadalafil was a PDE V inhibitor, as disclosed by the ‘377 patent. That cannot be right, as Lilly would have made two distinct contributions to knowledge, namely that tadalafil was a PDE V inhibitor, and that tadalafil could be used to treat ED.

The next question is whether the claim date of the ‘377 patent should be used, or the claim date of the ‘784 patent. Rennie JA held it was not necessary to decide [52], because de Montigny J had held [147] that notwithstanding the disclosure of Pfizer’s ‘377 patent, on the claim date of the ‘784 patent it was still not thought that oral administration of a PDE V inhibitor would be effective in treating ED. That is, the ‘377 patent did not change the common general knowledge and therefore the use of tadalafil to treat ED would not have been obvious over the ‘377 patent and the common general knowledge even at the priority date of the ‘784 patent. This was a finding of fact which was entitled to deference [53]. It might be said that the FCA should have decided the point anyway to provide clarity, particularly since it was fully argued, but on the whole I think the point is difficult enough that the FCA was right to leave it to a case in which it is determinative. I haven’t had any fresh thoughts of my own on which of those dates is preferable since I wrote my post on the decision of de Montigny J (here) and the more fully considered comments on Gleason J’s decision (here).

Exception to Implied Undertaking Rule

Gilead Sciences, Inc v Teva Canada Ltd 2016 FC 31 Tabib J aff’d 2016 FC 336 Barnes J
     2,261,619 / 2,298,059 / tenofovir disoproxil / TRUVADA ATRIPLA VIREAD

My post on Barnes J’s decision affirming Tabib J’s refusal to strike Gilead’s quia timet action focused on what is meant by “imminent” activity, but Tabib J’s decision is also interesting because she relieved Gilead of the implied undertaking rule, pursuant to which a party is prevented from using information obtained on discovery for any other litigation or purpose [1].

In 2011 and 2012 NOC proceedings commenced between Gilead and Teva in respect of products covered by the 059 and 619 patents [5]. In August 2012, while those proceedings were pending, Teva brought an action seeking a declaration that the 619 and 059 patents were invalid [6]. In December of 2013 the FC granted an order prohibiting Teva from launching prior to expiry of the 619 patent, but dismissing the application in respect of the 059 patent. Teva initially continued to prosecute its impeachment action in respect of both patents, but a year later, in December of 2014, it discontinued the action in relation to the 059 patent, though without amending the pleadings [8]. Gilead then instituted the present quia timet action, seeking a declaration that Teva had in the past and will in the future infringe the 059 Patent [10].

The 059 and 619 patents related to the fumarate salt of tenofovir disoproxil (TDF). In its impeachment action Teva alleged that it wishes to import, make, use and sell in Canada TDF or products containing TDF [13]. In bringing its quia timet action, Gilead sought to rely on this statement as a material fact supporting its allegation to the effect that Teva intends to and will import, make, use and sell in Canada products containing TDF prior to the expiry of the 059 patent [12]. In order to do this, Gilead sought to be relieved of the implied undertaking rule [1].

Tabib J noted that, inter alia, “the rule encourages parties to provide a more complete and candid discovery, again, furthering the interest of justice by giving them some assurance that the documents and answers will not be used for a purpose collateral or ulterior to the proceedings,” but the rule “is not however absolute and the Court retains the power to relieve persons of the obligation where it is in the interest of justice to do so” [14]. Tabib J noted that there is a recognized exception when “the deponent has given contradictory testimony about the same matters in successive or different proceedings,” and essentially the same consideration was at interest in this case [16]:

[17] Where it suited its purpose, as plaintiff in the . . impeachment action, Teva publicly described itself as an interested party on the basis of express allegations of an intent to come to market with products containing TDF prior to the expiry of the subject patents. It is fair to say that any facts that may have been disclosed on discovery by Teva to flesh out or support these allegations were proffered to advance Teva’s own interests in that litigation. . . . In the circumstances, the implied undertaking would permit Teva to play games with the administration of justice and to tailor its litigation position to suit its needs in each particular proceeding.

Tabib J also noted that “the narrow issue of whether Teva intends to and will come to market prior to the expiration of the 619 and/or 059 Patents is not just similar, it is the same. Teva cannot claim that they are distinct merely because the current action concerns only the 059 Patent while the [impeachment] action no longer concern that Patent: At the time discovery was given, the 059 Patent was directly at issue” [20]. Consequently, she held that Gilead is relieved of the implied undertaking rule in respect of the excerpts of discovery transcripts identified in its motion record.

More Disagreement with Rennie J on Application of Enhanced Disclosure Requirement for Sound Prediction

Allergan Inc v Apotex Inc 2016 FC 344 Zinn J
            2,307,632 / gatifloxacin ophthalmic

Zinn J packed a number of legal issues into this short decision. As well as the issue of blinding the expert witness, discussed in yesterday’s post, his analysis of utility is also interesting.

First, like Barnes J in Lilly v Hospira 2016 FC 47 (blogged here), Zinn J disagreed with the view expressed by Rennie J in Apotex / esomeprazole 2014 FC 638 [141] that the requirement to disclose the factual basis and the line of reasoning for a sound prediction of utility is “limited to the context of ‘new use’ patents, assuming such a utility disclosure requirement exists at all” (see here). Zinn J’s reasoning echoed that of Barnes J:

[57] With the greatest of respect to the views of Justice Rennie, I am not prepared to depart from established jurisprudence directly on point from the higher courts by relying on obiter statements of a few judges in cases where the issue of utility was not fully and thoughtfully addressed. In my view, until the Federal Court of Appeal or the Supreme Court of Canada rules otherwise, Canadian jurisprudence is that, with the exception of matters of common general knowledge, the factual basis and the line of reasoning must be included in the patent.

Thus it is increasingly clear that Rennie J’s view will not carry the day at the FC level without further guidance from a higher court.*

Second, Zinn J applied the promise doctrine to hold that to hold that utility should be assessed against three promises set out in the disclosure, and not against the lower scintilla standard [48]. He rejected the argument that expressed advantages were merely goals, on the basis that the promised utility was “clearly and unequivocally described” in the patent [46]. This reaffirms that any positive statement of utility will normally be taken as a promise. Zinn J’s holding is not particularly remarkable taken in isolation, but taken cumulatively with other cases on the promise of the patent, it is now evident that the FCA’s Plavix 2013 FCA 186 decision, which seemed to signal a more restrained approach to applying the promise doctrine, has turned out to have had very little impact on the law.

On the facts of the case, Zinn J held that not all of the three promises of the ‘632 patent had been met. The ‘632 patent claimed a pharmaceutical composition of gatifloxacin and disodium edetate (EDTA). Only Claim 10, which claimed EDTA in an amount of 0.01 to 0.1 w/v%, was in issue. One of the three promises was that the addition of EDTA would prevent precipitation of gatifloxacin crystals [46]. Utility was not demonstrated, because limited testing had been done [50], and while Zinn J accepted that EDTA in the tested formulations disclosed in the patent – 0.05% and 0.1% w/v% – did in fact impact the precipitation of gatifloxacin, he found that there was no evidence that this would allow a prediction that the same result would be obtained with the lower levels of ETDA (down to 0.01%) specified in Claim 10 [60]. It’s not clear to me how to reconcile this finding with Zinn J’s finding in the context of obviousness that “a POSITA would have a fair and reasonable expectation that combining gatifloxacin with EDTA would produce an effective ophthalmic compound that would have the three advantages set out in the 632 Patent“ [39], given that the three advantages considered in the context of obviousness corresponded to the three promises of utility, including prevention of precipitation [27]. Perhaps it would have been obvious to a POSITA that levels of EDTA greater than 0.05% would have reduced precipitation, but it would not have been predictable that lower levels would have the same effect. 

*UPDATE:  I've just recalled that in Gilead v Idenix 2015 FC 1156 [380] Annis J agreed with Rennie J on this point. That means the cases are divided 2-2 at the FC level, so it is perhaps not so clear how this will play out in the Federal Court. In any event, the matter will have to be resolved by the FCA in due course.

Expert Witness Preferred Because of Blinding

Allergan Inc v Apotex Inc 2016 FC 344 Zinn J
            2,307,632 / gatifloxacin ophthalmic

Yesterday morning I posted on Shire v Apotex 2016 FC 382, in which Locke J gave little weight to the practice of “blinding” the expert witness; then in the afternoon the FC released Allergan v Apotex, in which Zinn J has taken almost the opposite approach to the same issue. Apotex prevailed on the issue of obviousness primarily because Zinn J preferred the evidence of one of Apotex’s witnesses [8], and he preferred the evidence of that witness primarily because she was blinded (though also in part because her expertise was more directly relevant to the issue at hand) (my emphasis):

[12] While I am not convinced that all of these alleged flaws are made out, I am satisfied, for the following reasons, that the evidence of Dr. Sheardown [Apotex’s expert] is to be preferred and given more weight than that of Dr. Fix [Allergan’s expert] and Dr. Myrdal [Apotex’s expert].

[13] As noted by Apotex, Dr. Fix was not blinded; he offered his opinion after having read the 632 Patent and Apotex’s NOA and after having discussed both with Allergan. The Supreme Court of Canada in Apotex Inc v Sanofi-Synthelabo Canada Inc, 2008 SCC 61,[2008] 3 SCR 265 [Plavix SCC] at para 67, directs that an obviousness assessment is to be made “without any knowledge of the alleged invention as claimed.” Relying on this observation, this Court has recognized that evidence from experts who have not seen the patent nor been apprised of the positions of the litigants is to be given greater weight on issues going to obviousness and patent construction than the evidence of an expert with full knowledge of the patent’s disclosure and the positions of the parties: [citations omitted]

[14] Like Dr. Fix, Dr. Myrdal had prior knowledge of the 632 Patent (or the U.S. equivalent) and the positions of the parties. As acknowledged by Apotex, “[Dr. Myrdal] testified in a United States case on the corresponding patent and his evidence … in the present proceeding was consistent with his U.S. evidence.”

[16] Unlike the other experts in pharmaceutical formulation, Dr. Sheardown expressed her opinion on the common general knowledge and the prior art with no knowledge of the patent at issue or the positions of the parties. As such, her responses to the questions asked of her came without any influence, conscious or unconscious. Moreover, of the three, only Dr. Sheardown’s expertise focused on “studying and developing delivery formulations for ophthalmic applications.” Dr. Fix and Dr. Myrdal are expert formulators. However, given that the alleged invention in the claims at issue is specifically directed to an ophthalmic medication in the form of an eye drop, I am of the view that the evidence of the one expert specializing in that area, whose opinion is offered with no possible influence, is to be preferred.

As discussed here, the FCA in Mishan v Supertek 2015 FCA 163 recognized an inherent tension in the SCC’s approach to obviousness. On the one hand, Sanofi [67] says that the differences between the state of the art and the inventive concept must be “[v]iewed without any knowledge of the alleged invention as claimed.” But that is impossible: “The differences are based on the inventive concept of the claims in issue and the relevant prior art and, therefore, are determined based on some knowledge of what is claimed in the patent in issue. Therefore, some knowledge of the alleged invention will be reflected in the differences that are analyzed in applying step 4 of the Sanofi test” [Mishan v Supertek [36]].

So far as I can tell, in this case that tension was resolved by having Dr Sheardown express her opinion “on the common general knowledge and the prior art” [16] without knowledge of the patent or the position of the parties, but she must have then been provided with the patent before opining that “There is no practical difference between the inventive concept of the claims of the 632 Patent and the common general knowledge. Any differences between the inventive concept and the claims of the 632 Patent and what was known to the skilled person as of August 1998 constituted steps that would have been obvious to the skilled person” [34].

There are also two sides to this debate as a matter of policy. While blinding an expert may help avoid hindsight bias, unless the expert is asked to focus on “where the shoe pinches” it might be difficult to elicit relevant evidence. Also, as noted in yesterday’s post, the issue has arisen in the context of claim construction as well as obviousness. Is there a principled difference between the two contexts which would rationalize the divergent case law? In any event, the law on this point continues to develop, but until some consensus is reached it will be difficult to know how to instruct an expert.

Moderation in Blinding Expert Witnesses

Shire Canada Inc v Apotex Inc (NOC) 2016 FC 382 Locke J
            2,348,090 / mixed amphetamine salts (MAS) / ADDERALL XR

In this decision Locke J dismissed Shire’s motion for an order of prohibition in respect of Apotex’s extended release mixed amphetamine salts (MAS) on the basis of non-infringement, without addressing the other grounds raised. The decision turned on claim construction, and while Locke J considered a variety of technical arguments, in the end his construction and the consequent conclusion of non-infringement was quite straightforward. The most interesting aspects of the decision are Locke J's comments on “blinding” of expert witnesses, and his analysis of the inconsistency in the SCC’s Free World Trust decision on claim construction.

The ‘090 patent is entitled “Oral Pulsed Dose Drug Delivery System.” It claims an extended release formulation of mixed amphetamine salts which mimics a twice-daily dosage by means of “an immediate release dosage form containing a first dosage amount . . . and a second dosage form containing a second dosage amount . . .which has a release onset lag time,” with a correspondingly pulsed release profile [80]. Examples in the patent describe a capsule containing one dose in an immediate release form combined with a second dose in an enteric coating. Apotex’s product, in contrast, is a uniform tablet consisting of a uniform matrix in which MAS and excipients are dispersed in an enteric polymer [23]. It achieves its extended-release characteristics by virtue of the changing release mechanism from diffusion to a combination of diffusion and erosion as the tablet passes from the stomach into the intestine [24]. The technical claim construction exercise confirmed that this took Apotex’s product outside the claims of the ‘090 patent [157]. Locke J’s claim construction analysis strikes me as entirely compelling.

Of more general interest are Locke J's comments on “blinding” the expert witness, a practice which has been raised in a couple of recent cases. To recap, in Esomeprazole 2014 FC 638 Rennie J made the following remarks, in the context of obviousness (my emphasis):

[321] First, Apotex’s experts’ disbelief in a fear of racemisation facing the skilled chemist is more credible because its experts more closely emulated the perspective of the skilled person. Drs. Jacobsen and Danheiser (for Apotex) had mandates that allowed them to opine on the state of the art, in the words of the Supreme Court of Canada, “viewed without any knowledge of the alleged invention as claimed” (Sanofi-Synthelabo Plavix, at para 67), while both Drs. Davies and Armstrong (for AstraZeneca) did not. More specifically, the Apotex experts were “blinded” from the 653 for their initial reports addressing whether and how the enantiomers of omeprazole could be obtained. By contrast, Dr. Davies has given extensive evidence in prior esomeprazole litigation, while Dr. Armstrong, to a lesser extent, has also addressed the ‘653 patent in a prior case

Then, in her Rasagiline 2014 FC 1070 decision, (blogged here, and see also here) Gleason J, citing Rennie J’s Esomeprazole 2014 FC 638 decision, made this statement in the context of claim construction (my emphasis):

[94] Secondly, I agree that the manner in which the experts were retained and instructed in this case provides a reason to prefer the evidence of the Apotex experts over that of the Teva experts. Because they did not know what alcohol Apotex had used in its Products when they conducted their construction exercise, their interpretation was undertaken in accordance with the direction from the Supreme Court of Canada, requiring that the construction exercise be uninfluenced by concerns over infringement or invalidity. The Teva experts, on the other hand, conducted their construction of the terms with a view to the potentially infringing substance. This is evident from the terms of their affidavits, which indicate that the molecular structure of [. . .] was factored into the construction exercise.

These cases indicated a nascent trend in favour of “blinding” experts. But then in Apotex / Tadalafil 2015 FC 875, Gleason J resiled somewhat from this suggestion (my emphasis):

[166] Insofar as concerns the allegation regarding lack of “blinding”, Apotex has tried to apply the decisions in Teva [Rasagiline] and AstraZeneca [Esomeprazole] out of context. There, the experts whose credibility was found to be wanting based their construction of the patents in suit with a view to infringement and were able to come to their opinions based on the information in the generic company’s NOA. In Teva, this led to an especially tortured construction. In Teva and AstraZeneca, the approach taken was found to undercut the experts’ credibility as it led to an improper results-oriented opinion. Neither case can be read for the position that Apotex sought to advance here, namely, that in any case where one party blinds its experts but the other does not, the former’s evidence is to be preferred. Rather, these two decisions must be limited to the facts that arose in these cases.

In the case at hand Apotex’s experts never saw the NOA and were never told Apotex’s legal position, while Shire’s experts were not similarly blinded [42]. Apotex argued that the evidence of its experts should be preferred for that reason [43]. Locke J rejected this suggestion, at least insofar as it would represent a general rule (citations omitted):

[45] I agree to some extent with both parties. In some situations, the fact that an expert witness was unaware of the features of an allegedly-infringing product when they formed their opinion on claim construction may be helpful in deciding the weight to be placed on that expert’s opinion. However, I agree with Shire that favouring the evidence of experts who have been blinded has not been raised to the level of a legal principle that must be applied in all cases, and is merely persuasive. I am mainly interested in the substance of an expert’s opinion and the reasoning that led to that opinion. If it is well-reasoned, there may be no reason for concern about whether the witness was blinded to certain facts when giving the opinion. A concern may arise where the expert’s opinion seems tortured or less well-reasoned.

The reference to “tortured” evidence echos Gleason J’s statement in Tadalafil. This suggests that blinding an expert will only be helpful if the expert's evidence seems tortured. While that would normally be a reason for discounting the evidence, if the tortured evidence was obtained from an expert who had been blinded, it might nonetheless retain some credibility.

Locke J also made a very interesting critique of the premise of the argument in favour of blinding:

[46] I am also conscious that the blinding of witnesses is no guarantee that the expert evidence before the Court is reliable. It would not be difficult (though it would be expensive) for an unscrupulous party to seek opinions from a number of experts, keeping them all blind to unnecessary information. If one of those many experts provided the opinion that the party sought and all of the others concluded otherwise, the party would be able to retain the outlier and present him or her as a blinded (and therefore reliable) witness.

Finally, on a different topic entirely, Locke J also had an interesting “Aside on claim construction principles” [134]–[144], in which he discussed the evident inconsistency between the SCC’s Free World Trust 2000 SCC 66 claim construction principles and its treatment of the so-called Improver questions (originally formulated by Lord Hoffmann when he was sitting in Chancery). After reviewing a number of cases and commentators discussing the problem, Locke J concluded (original emphasis) that:

[137] In my view, the SCC likely intended that, in order for a patentee to establish that a claim element is non-essential, it must show both (i) that on a purposive construction of the words of the claim it was clearly not intended to be essential, and (ii) that at the date of publication of the patent, the skilled addressees would have appreciated that a particular element could be substituted without affecting the working of the invention.

I won’t go into the details, as the discussion is arcane, even by patent law standards. Lord Hoffmann himself has called the Improver questions a mangle (Kirin-Amgen [2004] UKHL 46, [52]), and it is fair to say that the SCC’s gloss did not clarify them. Moreover, the Improver questions are rarely used, and nothing in Locke J’s interpretation of Free World impacted his decision – as he said, it was an aside. But if the question does arise again, Locke J’s analysis will have to be taken into account.

How Accurate are Damages Calculations?

TearLab Corp v I-Med Pharma Inc 2016 FC 350 Russell J

2,494,540 / TearLab System / i-Pen System

This cases raises, albeit indirectly, the interesting question of how it could be shown that damages are inadequate for the purpose of establishing irreparable harm.

Russell J refused to grant an interim injunction in favour of TearLab which would have prevented I-Med from launching its allegedly infringing product pending a motion for an interlocutory injunction. (TearLab is the exclusive licensee of the University of California's ‘059 patent [6].) Russell J’s reasons followed established Canadian law. To get an interim or interlocutory injunction, the patentee must show irreparable harm, and the standard for showing such harm is stringent: the evidence of harm must be “clear and not speculative”, the harm itself must flow almost inevitably, and mere difficulty of calculating damages does not constitute irreparable harm, “provided there is some reasonably accurate way of measuring those damages” [43]. In this case, Russell J held that the evidence presented by TearLab did not satisfy these requirements.

Russell J’s conclusion was not very surprising on the facts. TearLab relied on the evidence of Mr Tierney, the retired business director of Allergen Eye Care, to the effect that there was no good model for quantifying TearLab’s losses [38]. But as Russell J pointed out, Mr. Tierney was not an expect in market forecasting or quantification of damages. And in any event, the courts have long acknowledged that damages assessment is a “broad axe” not a “rapier point,” and mere difficulty of calculating damages does not establish irreparable harm. There is an argument to be made that “meaningful doubt as to the adequacy of damages” should be sufficient to constitute irreparable harm, at least as a part of a balancing analysis, but that view has not carried the day in the Federal Courts.

This raises the question of whether it is possible, even in principle, for a patentee to establish to the satisfaction of the Federal Court that the difficulty in assessing damages is sufficient to constitute irreparable harm. The legal question is whether “there is some reasonably accurate way of measuring those damages.” On its face this seems to be an objective question capable of being addressed with the right kind of evidence. But question may be circular. The difficulty is that, so far as I know, the damages assessment itself is the best method we have of establishing the true loss. In s 8 and pharma damages cases, for example, sophisticated economic models are used to assess the difference between pharmaceutical prices with and without generic entry. In the absence of some more accurate method of assessment then it will be impossible to prove that damages are not reasonably accurate. But in light of the widespread judicial acknowledgement of uncertainties in damages calculations, even the best possible estimate of damages is not necessarily reasonably accurate. There is a difference between saying that damages are $1,000,000 plus or minus $1,000, and saying damages are $1,000,000 plus or minus $1,000,000. 

How accurate are damages assessments? In principle a formal error analysis of existing methods of damages assessment could address this question. However, that would be demanding from an evidentiary perspective, as the patentee and alleged infringer would be not only arguing over the quantum, but also over the accuracy of the quantum, which adds a layer of complexity to an already complex inquiry. And from a strategic perspective, the patentee would be caught in a squeeze, as it would want to argue that the errors are large in order to establish that damages assessments are not accurate in order to obtain an interlocutory injunction, but that would mean conceding the possibility that its subsequent damages claim might fall in the lower end of the range. My point isn’t that it is unfair to put the patentee in this squeeze, but rather that there are practical reasons why evidence of the accuracy of damages assessment is unlikely to be forthcoming. Another practical problem is that undertaking an error analysis in order to make the case for an interlocutory injunction would be very expensive and likely to be worth the cost only in pharma cases (if even there). Given that pharma has the NOC system which provides a statutory interlocutory injunction, it is hard to imagine a case in which it would be worthwhile for a plaintiff to incur this expense. Perhaps this is an issue that could be addressed by an academic economist.

“Imminence” in a Quia Timet Action

Gilead Sciences, Inc v Teva Canada Ltd 2016 FC 336 Barnes J aff'g 2016 FC 31 Tabib J
     2,261,619 / 2,298,059 / tenofovir disoproxil / TRUVADA ATRIPLA VIREAD

In this decision Barnes J upheld Prothonotary Tabib’s refusal to strike Gilead’s quia timet action. The most interesting aspect of the decision concerns what is meant by “imminent” activity.

In the prior NOC proceeding 2013 FC 1270 (blogged here), Gilead had sought an order of prohibition based on the ‘619 and ‘059 patents. Barnes J held that the ‘059 patent, for the fumarate salt form of tenofovir disoproxil, was invalid as obvious, but he held the ‘619 patent, to tenofovir disoproxil itself, was valid and he granted an order prohibiting in the Minister from issuing an NOC to Teva in respect of its tenofovir disoproxil fumarate product until the expiry of the ‘619 patent. Gilead is now seeking to bring a quia timet infringement action, presumably based on the ‘059 patent (though that is not stated expressly in the decision).

Teva sought to strike Gilead’s Statement of Claim on the basis that it did not satisfy the test for maintaining a quia timet proceeding which was set out in Connaught Labs, [1998] FCJ No 1851, 86 CPR(3d) 36, [18] (my numbering):

[1] the statement of claim must allege a deliberate expressed intention to engage in activity the result of which would raise a strong possibility of infringement;

[2] the activity to be engaged in must be alleged to be imminent and the resulting damage to the plaintiff must be alleged to be very substantial if not irreparable; and,

[3] finally, the facts pleaded must be cogent, precise and material.

Barnes J held that the first part of the test was satisfied, as Teva had declared an intention to come to market with a competing version of Gilead’s tenofovir disoproxil product as soon as it could obtain an NOC, and while this was not completely inevitable, the “strong possibility” found by Tabib J was consistent with Connaught and other cases [9].

Teva also argued that the allegedly infringing activity was not “imminent” because the probable date of launch was 22 months away, on expiry of the ‘619 patent. Barnes J at [10] rejected this argument, approving Tabib J's statement that:

The purpose of a quia timet action is to stop an event before it happens. Given that streamlined infringement actions may now be heard and determined in two years, it is neither premature nor pointless to institute such an action 22 months before the occurrence of the event to be avoided.

Moreover, Barnes J helpfully clarified why there is a requirement of imminence at all. The purpose of the restrictions on the quia timet proceeding is to avoid wasting judicial resources on an action that may turn out to be pointless. On that rationale, if the allegedly infringing action is inevitable, it shouldn’t matter whether it will happen tomorrow or ten years from now. But, as Barnes J explained:

[11] [T]he requirement of imminence in the temporal sense may be relevant in the determination of the likelihood of a future event. A potential event that is more distant in time may be an event that is less likely to occur.

Imminence is not directly relevant, but only in so far as it affects the probability of the future event. This implies that “imminence” is not to be judged solely temporally, but in a balance with other evidence of the likelihood of the future event. By the same token, “temporal imminence appears to be a subordinate consideration in a case where the likelihood of future harm appears high” [11].

Section 8 Bifurcation Refused

Teva Canada ltd v Janssen Inc 2016 FC 318 Diner J
             bortezomib / VELCADE

In this decision Diner J upheld the case management Prothonotary’s order refusing to bifurcate the plaintiff’s s 8 action into liability and damages phases, and also refusing to bifurcate the s 8 action from the infringement counterclaim. Diner J held that the Prothonotary had considered the appropriate factors [9] and there was no basis for interfering with a discretionary order [10]. Without the Prothonotary’s order, it is hard to comment further.

Improper Priority Claim is Not a Material Misrepresentation

Uponor AB v Heatlink Group Inc 2016 FC 320 Manson J

2,232,376

I believe this is Manson J’s first patent decision since being appointed to the Federal Court. While the case spanned many grounds of validity and infringement, in the end it turned on its facts. The most interesting legal point relates to s 53 of the Act, but I also have a few miscellaneous comments on other aspects of the decision.

PEX is cross-linked polyethylene. It is used primarily for pipe and tubing (such as the new PEX water-pipes that I had just had installed in place of copper in my on-going kitchen renovation). The polyethylene used in making PEX is cross-linked by heating in the presence of an additive (such as peroxide) [77]. The ‘376 patent relates to a method of heating polyethylene (for the purpose of cross-linking, though that is not specified in the broadest claims), by heating it with infrared (IR) lamps “wherein wave lengths corresponding to the absorption peaks for the [polyethylene] material in respect of infrared radiation, have been eliminated in the infrared radiation irradiating the polymer material” [22, Claim 1]. Polyethylene has two absorption peaks, at 3.2 to 3.6 μm and 6.6 to 6.8 μm [20]. If it is heated by IR which includes those wavelengths, the surface layer of the polyethylene will absorb most of the radiation resulting in uneven heating and therefore uneven cross-linking. By excluding those wavelengths, the radiation will permeate though the entire thickness, giving more uniform cross-linking [21].

The main difficulty for the patentee is that the prior art, in particular the widely consulted “IR Handbook” [207-13] and US patent 4,234,624 [222-23] disclosed the idea of using short-wavelength IR (1.2 μm and 0.76 to 4 μm, respectively), to heat polyethylene for cross-linking. The ‘376 taught two methods of eliminating the undesired wavelengths, namely by filtering them out with a filter that blocks those wavelengths [38], or by using an IR source with a wavelength at 1.2 μm [39]. Thus it is clear that the term “eliminated” encompassed using a low wavelength source. Consequently, most of the broad claims were held to be anticipated or obvious [298]. Some of the claims specified that the undesired wavelengths were to be filtered out, but the patent did not disclose any suitable filter, so many more claims were invalidated. However, a few claims covering what the patent described as a preferred embodiment were held to be valid [251] and infringed [297]. These claims added the element of feeding the extrusion vertically through the IR lamps; this produces a more uniform pipe as it reduces distortions in the hot plastic due to gravity.

No New Cases for the Week of 14 March

No new patent / NOC / data protection cases were released for the week of 14 March 2016.

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.