Markman Hearings Come to Canada?

Viiv Healthcare Company v Gilead Sciences Canada, Inc 2020 FC 486 Manson J
            2,606,282 / bictegravir / BIKTARVY

The most significant aspect of this decision is the simple fact that Manson J granted a contested motion for a summary trial on a claim construction issue – essentially a Canadian version of a Markman hearing. ViiV had brought an action alleging that its 282 patent was infringed by Gilead’s bictegravir product, sold as BIKTARVY. Gilead responded with a motion for a summary trial, which Manson J granted despite ViiV’s objections and attempts to “derail” it [18]. This follows on last fall’s decision in Canmar Foods v TA Foods 2019 FC 1233 (see here and here), in which Manson J explained that for a decade after the FCA restricted the availability of summary trial in MacNeil Estate 2004 FCA 50, “summary judgment as a just, efficient and expeditious means to resolve disputes on a proportionate basis was lost” [45], until Hryniak v Mauldin, 2014 SCC 7 resulted in “a culture shift” that “opened the door for a more reasoned approach to the use of summary judgment motions” [46]. (The only other recent summary trial that I’m aware of is Cascade v Kinshofer 2016 FC 1117, but it was on consent.) It will be interesting to see whether other FC judges agree with Manson J’s view of the effect of Hryniak, and, when an appeal inevitably comes, whether the FCA agrees as well. (I must say it seems like a good idea to me, but procedure is not my area of expertise.) Manson J’s specific reasons for granting the motion on the facts of this case ([11]-[18]), will be of interest in future motions of this type, but since the discussion is brief and I don’t have anything to add, I won’t go through it.

Recourse to the disclosure in claim construction
The key substantive issue was the construction of a single claim term. The most interesting substantive point is that Manson J, after an extensive review of the case law, had recourse to the disclosure to construe the contested claim term, even though it appeared on its face “to be a clear and unambiguous term” [128]

All the claims at issue (Claim 1 is exemplary) [88], are claims to a class of compounds comprising Ring A.

Ring A is defined in the claim as an “optionally substituted heterocycle” [102]. The key issue — where the shoe pinches — is whether Ring A includes only fused and spiro rings, or also a bridged bicyclic ring, as is found in bictegravir.
Much of Manson J’s discussion concerned the proper approach to claim construction. As Manson J noted, the “[t]he law is clear that recourse to the disclosure is improper to vary the scope or ambit of the claims” [126], [136]. However, it is said that while recourse to the disclosure is “permissible to assist in understanding the terms used in the claims,” it is “unnecessary where the words of the claim are plain and unambiguous,” Dableh (1996) 68 CPR (3d) 129 (FCA) at 144 [126].

The tricky question is whether it is permissible to consult the specification as a whole only when the claims are ambiguous. What if the words of the claim appear to be clear when read in isolation, but when read in the context of the disclosure as a whole, it is apparent that they mean something different from what they “clearly” mean when read in isolation? Is it necessary to make a determination that the claims are ambiguous before recourse to the disclosure is permissible? A series of decisions have wrestled with this question.

I won’t go through Manson J’s review of the case law in detail, but I would highlight his conclusion:

[66] The common thread in all of these cases is that the court is to construe the claims through the eyes of the POSITA in light of their CGK at the relevant date. Apart from the patent specification, the only evidence the Court should consider to inform its analysis of the claims is evidence of how the POSITA would understand the claims in light of his or her relevant CGK in the context of the specification as a whole (Bombardier FCA [2018 FCA 172] at para 24).

In other words, the claims must be read in the context of the specification because the claims are part of the specification. This strikes me as clearly correct; I won’t say more as I’ve discussed the principles at length in other posts.

Manson J’s application of these principles to the facts is clear:

[128] While “optionally substituted heterocycle” as used in claim 1 appears on its face to be a clear and unambiguous term, I accept that recourse to the disclosure is necessary to understand the meaning given to these words by the inventors, and the intended scope of this claim language.

This is a clear holding, applied on the facts, that it is permissible to have recourse to the disclosure to understand the claims, even if the claims appear to be clear when read in isolation.

Essentiality
I’ll conclude with a brief comment on the essentiality analysis. ViiV argued that if Manson J construed Ring A as being limited to spiro and fused structures only, it was necessary for the Court to go on to consider whether the bridged ring was an obvious variant. Manson J rejected this, saying

[167] In light of ViiV’s admission that Ring A, as an “optionally substituted heterocycle,” is an essential feature of the invention, the Court does not accept that it should now look at a variant of this essential feature. The Free World Trust [2000 SCC 66]variant analysis focuses on a claimed element of an invention, not some sub-element or feature of the claimed element.

I’m not sure I agree with this. It is true that Free World Trust focused on what it described as “elements” but it’s not clear to me that the analysis turns on what particular aspect of the claim is identified as an “element.” The term “element” never even appears in earlier cases, such as JK Smit [1940] SCR 279 or Birmingham Sound [1956] RPC 232 (CA), that the SCC inWhirlpool 2000 SCC 67 [45], [47] identified as exemplifying the analysis. In any event, the point was not determinative, as Manson J went on to hold that in any event, ViiV had not met its burden of establishing that it would have been obvious to the POSITA at the publication date that bridged bicyclic Ring A structures would have no material effect on how the invention works” [168].

An Active Ingredient Is a Medicinal Ingredient

Glaxosmithkline Biologicals S.A. v. Canada (Health) 2020 FC 397 Barnes J
            2,600,905 / SHINGRIX

I believe this is the first decision interpreting the provisions of the Patent Act relating to the Certificate of Supplementary Protection (CSP) (s 104ff), which came into force in Sept of 2017 in order to meet Canada’s commitment under Art 20.27 of CETA [18]. Section s 106(c) of the Act, in combination with s 3(2) of the CSP Regulations, provides that a CSP may be only be granted for a patent that “contains a claim for the medicinal ingredient or combination of all the medicinal ingredients contained in a drug.” GSK sought a CSP in respect of the 905 Patent and the drug SHINGRIX. Claim 1 of the 905 patent is to a composition consisting of a truncated antigen and an adjuvant. The Minister refused the CSP on the basis that (i) an adjuvant is not a medicinal ingredient; and (ii) a CSP may only be granted for a patent directed solely to a medicinal ingredient or ingredients.

Both the Minister’s decision and that of Barnes J focused on the first point. Barnes J held that a medicinal ingredient means a biologically active ingredient; he considered the Minister’s position, that a medicinal ingredient must have some independent biological activity, even if only to a negligible extent, to be unreasonable. Because Barnes J held that an adjuvant is a medicinal ingredient, and because the 095 patent was directed solely to the antigen and an adjuvant, it was unnecessary for Barnes J to consider whether a CSP may only be granted for a patent directed solely to a medicinal ingredient. This issue will surely be raised in future cases, and Barnes J’s remarks on the point, though very brief, are worth noting.

Barnes J’s decision makes it clear that the Minister’s position on the definition of “medicinal ingredient” was entirely divorced from the text of the Act and CSP Regulations (as well as being unsupported by purposive considerations). I will suggest that the same appears to be true in respect of the second issue. I get the distinct impression that the Minister’s policy was developed by people who thought they already knew what the Act said, and so didn’t bother to actually read it, either before or after developing the policy.

The “Would Have” Branch of the Non-Infringing Alternative Analysis

Apotex Inc v ADIR 2020 FCA 60 Mactavish JA: Webb, Near JJA aff’g 2018 FC 346 Gagné J
            1,341,196 / perindopril / COVERSYL

In this decision the FCA affirmed Gagné J’s holding that Apotex had not established a non-infringing alternative defence in respect of an accounting of profits. I was very critical of Gagné J’s holding in my post on her decision, on the view that what I called “Dr Sherman’s idiosyncratic non-economic motivations,” should not have been taken into account, as doing so meant that the amount awarded as an accounting would not reflect the true economic value of the invention. On reading the FCA decision, I now see that my criticism was not entirely well-founded. On the one hand, the FCA decision reinforces the view that the “would have” branch of the NIA test is and should be focused on economic considerations; but on the other hand, I now see that the motivations taken into account by Gagné J actually were economic in nature.

The perindopril litigation started with 2008 FC 825 aff’d 2009 FCA 222, holding that ADIR’s 196 patent was valid and infringed by Apotex. ADIR elected an accounting, and the profits portion of the action has gone back and forth between the FC and FCA a couple of times. Gagné J’s initial decision refusing to consider the availability of a non-infringing alternative was decided just before the NIA defence was accepted by the FCA in Lovastatin Damages 2015 FCA 171 and Effexor / Venlafaxine 2016 FCA 161: see Perindopril Profits #1 2015 FC 721 rev’d in part and remanded by Perindopril Profits #1 Appeal 2017 FCA 23, discussed here. The remand gave rise to the decision under appeal, which we might as well call Perindopril Profits #2, making this FCA decision Perindopril Profits #2 Appeal.

Stay of Judgment Pending Appeal Granted

Evolution Technologies Inc v Human Care Canada Inc 2019 FCA 11 Webb JA granting motion for stay of judgment of 2018 FC 1304 Elliott J

At trial, Elliott J held that Human Care’s 392 patent was valid and infringed by Evolution Tech: see here. In this decision from January of 2019, only recently posted to the FCA website, Evolution sought a stay pending appeal. The applicable test is the same American Cyanamid test used in interlocutory injunctions, requiring a serious question to be tried on the merits, whether the applicant would suffer irreparable harm and and assessment of the balance of convenience [21]. The serious question threshold is low and was satisfied in this case [24].

Interlocutory injunctions are almost never granted by the FC in patent matters because of the very high threshold for establishing irreparable harm that is applied by the Federal Courts. However, irreparable harm was made out in the unusual circumstances of this stay application, for two reasons. First, Evolution established on the balance of probabilities it did not have enough money to pay the major part of the judgment and would be put out of business if required to pay [29]. This is well-recognized as perhaps the clearest type of irreparable harm: [29]. Second, normally a party seeking an interlocutory injunction will undertake to compensate the other party for any losses suffered as a result of the injunction if the injunction turned out to be ‘wrongly’ granted, in the sense that the other party ultimately prevailed on the merits. In this case, however, Human Care declined to give an undertaking to pay any amount to Evolution for any loss sustained by Evolution if the stay was not granted and Evolution was ultimately successful in its appeal [31]. Without such an undertaking, Evolution would be entirely uncompensated for its losses suffered as a result of being enjoined from selling the goods in question prior to the appeal decision, and that would clearly be a form of irreparable harm. The balance of convenience analysis followed largely from the irreparable harm issues. It is worth noting that Webb JA only stayed payment of the largest amount ordered, relating to the accounting of profits itself; the award of reasonable compensation, pre-judgment interest and costs were not stayed.

Human Care also raised two variants of an unclean hands argument, which, if successful would have meant that the stay would be denied without the need to consider the Cyanamid test. First, Human Care argued that Evolution had breached court orders by previously failing to disclose the financial documents which it has now tendered as part of its motion record [10], and so the documents should be inadmissible, following White v E B F Mfg 2005 NSCA 103 . Webb JA rejected this, and distinguished White, on the basis that a breach of the court orders had not been established [15]. Human Care also argued that Evolution had not fully disclosed its assets [16]. While Webb JA considered that Evolution had not been entirely forthcoming, this fault was not sufficiently related to the question of whether a stay should be granted [20].

In the end, Human Care’s refusal to give an undertaking was wise, as Evolution’s appeal was ultimately successful; see 2019 FCA 209, blogged here.

Market Share Expert Not Required for Market Share Damages Analysis

DNOW Canada ULC v Estate Grenke 2020 FCA 61 Dawson JA; Rennie, Rivoalen JJA var’g 2018 FC 564 Phelan J
            2,095,937 / stuffing box

It has been a decade now since Phelan J held Grenke’s 937 patent to be valid and infringed in Weatherford v Corlac 2010 FC 602 — so long that the parties or their names have almost all changed for one reason or another — and this is the fourth (dare I say final?) trip to the FCA. The decision now under appeal, 2018 FC 564 (here), is Phelan J’s award of $8 million in damages [9]-[10]. The defendants alleged a variety of errors by Phelan J in his assessment of the facts. While the FCA noted in couple of places that Phelan J’s reasons might have been more detailed [61], [113], the Court rejected most of these challenges on a deferential standard of review [19]-[20]. No new law was applied (the decision starts with a handy review of damages principles [18]), but there are a couple of points worth mentioning.

The 937 patent relates to an environmentally friendly stuffing box that prevents oil from spilling out of the top of a production oil well. During the relevant period, there were three main manufacturers in this market, including the plaintiffs and the defendants, along with some smaller players [35]. Total sales volume was on the order of a couple of thousand units annually [41]. Phelan J used historical market share as the basis (with adjustments) for assessing lost sales. The FCA affirmed that a market share analysis was appropriate on the facts; this is not a case, such as Alliedsignal 1998 CanLII 7464, with only nine customers in the market, in which a review of the evidence on a customer-by-customer basis would be necessary [68].

The plaintiffs relied on only one witness for the market share analysis [46], and the defendants objected to the witness’ qualifications on the basis that he not qualified as a “market share expert” [48]. (Presumably that means an accountant or economist with expertise in market assessment and modeling.) However, the witness in question was an expert on the industry and its purchasing preferences; he had personal knowledge of product offerings and the merits of available products, and of the market generally, from his long experience as a purchaser in the industry. The FCA held that it was not an error for Phelan J to have relied on this evidence in assessing the market share lost as a result of the infringement [76]-[78].

A final point of interest concerns loss of “convoyed” sales. “Convoyed” products are products that are not themselves protected by the patent, but that are typically sold with, or as a result of, the sale of a patented product [142]. The FCA reaffirmed that “An entity claiming under a patent is ‘entitled to damages assessed upon the sale of non-infringing components when there is a finding of fact that such sale arose from infringing the patented component’ [143] (quoting with approval Beloit v Valmet-Dominion Inc [1997] 3 FC 497 (FCA). However, the FCA stressed that the mere fact that the convoyed goods in question are commonly sold with the infringing goods is not sufficient to establish causation: [153-55]. What is required is “a specific finding based on evidence” that the loss of sales of the convoyed parts was caused by the loss of sales of the infringing products [154]: “‘[s]imply because a non-infringing product appears on the same invoice as a drive is not sufficient to establish causation’” [151] (quoting and agreeing with the appellants’ submission). The FCA was of the view that Phelan J had erred on this point [156], and, after assessing the evidence itself, held that no damages for lost convoyed sales should be awarded [169]. This was the sole point on which the FCA reversed Phelan J.

Blogging Hiatus

I'll be taking a blogging break for a week or two as I try to get my courses set up for online delivery. When I get back, I'll start by catching up with any decisions that I've missed.

Hearsay Evidence Not Enough to Ground Stay Pending Appeal

Western Oilfield Equipment Rentals Ltd v M-I LLC 2020 FCA 3 Nadon JA refusing to stay 2019 FC 1606 O'Reilly J
            2,664,173 / Shaker and Degasser Combination

In this decision, Nadon JA refused Western Oilfield’s motion for a stay pending appeal of 2019 FC 1606, in which O’Reilly J found that Western infringed the 173 patent and had consequently granted an injunction, as well as awarding damages and costs against Western in the vicinity of $5 million [2]. Western moved for a stay on the basis that its assets, covered by security interests, are insufficient to cover the monetary award and that unless a stay is granted, its creditors will enforce their security interests and it will become insolvent [4].

While being put out of business is normally considered a type of irreparable harm sufficient to establish the second branch of the RJR-MacDonald test, [1994] 1 SCR 311 at 341, Nadon JA emphasized that any such harm must be established on the evidence [11-12]. In this case, the main evidence was provided by Western’s controller [13]. She testified that Western did not itself have adequate funds to satisfy the award [16], but the crucial issue was the position of its financiers. She gave evidence that should Western inform its bank of the decision against the it, the likelihood is that the bank will execute its security interests over Western’s assets [17]. She also gave evidence that Western’s venture capital backers would cease funding Western if Western were prevented from earning revenue as a result of the injunction [21].

The difficulty is that all this evidence as to what Western’s financiers would do, was hearsay [22]. Nadon JA held that Western should have produced “an affidavit from their bank outlining its position following the rendering of the judgment and its position in the event that a stay was not granted” [18] and a similar statement from the managing director of the venture capital companies as to “the impact of the Decision on their funding decisions and whether or not a stay of the Decision would lead to a different position on their part” [19]. This information was crucial to his determination regarding irreparable harm [19], and in its absence he was not satisfied that the irreparable harm branch of the RJR-MacDonald test was satisfied [24].

It seems that as of the time of the hearing, Western had not yet informed its bank of the trial decision, apparently out of a concern that had the bank been informed of the Decision, it might, irrespective of the possibility of obtaining a stay, have called in Western’s advance and exercised its security interests [17]. If that concern is well-founded, then this decision puts Western between a rock and a hard place.

Correcting Inventorship Post-Grant

Inguran LLC dba STgenetics v. Canada (Commissioner of Patents) 2020 FC 338 Brown J

2,518,882 / 2,752,218 / 2,752,244 / 2,752,247

This decision concerned an uncontested application to remove six named inventors from several granted patents. Brown J followed Qualcomm 2016 FC 499 (here) in holding that an affidavit from remaining inventors to the effect that they are the sole inventors is not required, so long it is adequately established on the other evidence that the named inventors to be removed are not in fact inventors. The case also illustrates that the power of the FC to correct inventorship is post-grant pursuant to s 52 is broader than the power of the Commissioner to correct inventorship pre-grant pursuant to s 31.

In this case, the original application had twelve named inventors. After a unity of invention objection by CIPO, the application was divided into divisional applications relating separately to electro-mechanical subject-matter and biological subject-matter. All twelve inventors were left on the divisionals, even though the named inventors sought to be removed in this application had not contributed to electro-mechanical subject-matter claimed in the patents at issue. This application sought to remove those non-inventors.

Before a patent is granted, inventors can be removed by the Commissioner pursuant to s 31(3) and added by the Commissioner pursuant to s 31(4). The Commissioner does not have the authority to add or remove inventors after grant: Micromass 2006 FC 117. (The Commissioner can correct some essentially clerical errors under the Patent Rules, including a spelling error in the name of an inventor pursuant to Rule 109 (this was previously authorized by s 8, now repealed).)

Post-grant, grant, inventors may be added or removed on application to the FC pursuant to s 52, which gives the Court broad authority to “order that any entry in the records of the Patent Office relating to the title to a patent be varied or expunged.” A number of decisions by the FC have invoked the test under s 31 in a decision pursuant to s 52, notwithstanding that on its face s 31 applies only to the Commissioner in respect of applications (see here). Presumably this is because s 31 provides more specific guidance regarding changes in inventorship specifically.

There is a bit of a concern regarding this practice, as s 31 is more restrictive than the broad powers granted to the Court by s 52. In particular, s 31(3) regarding removal of non-inventors (ie named inventors who in fact did not contribute to the development of the claimed inventions), specifies that the application may be carried on by the remaining inventors “on satisfying the Commissioner by affidavit” that they are the true inventors. S 31(4), regarding addition, provides that inventors may be added on satisfying the Commissioner that (i) they should be so joined, and (ii) that the omission of the further applicant or applicants had been by inadvertence or mistake and (iii) was not for the purpose of delay. The question is whether these—in particular (ii) and (iii) are all required under s 52 as well.

Brown J agreed with the submission that in an application under s 52 the Court “may apply” the tests set out for the Commissioner of Patents in subsections 31(3) and 31(4) [35], citing various cases. I’d quibble a bit on this point, at least to the extent that “apply” suggests that the test under s 31 is also the strict test under s 52. Section 31 was certainly considered in the cases cited by Brown J, but I’m not sure it was actually adopted as the test under s 52, rather than as identifying relevant considerations. While the application to correct inventorship under s 52 will certainly be granted when the test under s 31 is satisfied, the question is whether it is necessary to satisfy the test under s 31 to correct inventorship under s 52. Brown J’s decision suggests that the answer is no.

First, Brown J noted at [37] that in Imperial Oil 2015 FC 1218 Leblanc J set out two criteria for the removal of named inventors set out by subsection 31(3):

[15] Subsection 31(3) of the Act sets out two criteria for the removal of named inventors:

i. does it appear that one or more of the named inventors have no part in the invention?; and

ii. has an affidavit been provided to satisfy the Court that the remaining inventors are the sole inventors?

However, in this case, two of the six remaining true inventors could not be located [29] and so they did not provide affidavits. There was plentiful evidence from the other named inventors, including both the true inventors and the non-inventors, that the non-inventors were indeed not inventors, and Brown J followed Qualcomm 2016 FC 499 (here) in holding this was a housekeeping requirement that is “not relevant when an issued patent is being considered by the Court under section 52 of the Act” (Qualcomm [10], quoted at [39]).

Thus, whether or not affidavits from all remaining applicants are required under s 31(3), there is no such requirement under s 52. This indicates that the test under s 52 is not the same as the test under s 31(3).

This makes sense functionally. It may be much more difficult to find the remaining inventors post-grant, as is illustrated on the facts of this case. Further, while it may make sense for the Commissioner to want to be satisfied that the remaining applicants are in fact the inventors before the patent is granted to them, it is not clear why the FC would need to be satisfied that the remaining inventors are in fact inventors, given that the Commissioner was already satisfied of this fact on granting the patent. Surely, post-grant, that can be presumed. The real question post-grant is simply whether the inventors sought to be removed were not in fact inventors, and it would seem that affidavits from those non-inventors to that effect would normally be sufficient evidence. I suppose the point will really be tested if one named inventor is to be removed, on the basis of satisfactory evidence that the named inventor not in fact an inventor, in circumstances in which none of the remaining named inventors can be located. It seems to me that it would be clearly appropriate for the FC to order the non-inventor to be removed in such circumstances.

Patentee That Did Not Sue in the Real World Cannot Say it Would Have Done So in the “But For” World

Pfizer Canada ULC v Pharmascience Inc 2020 FCA 55 Laskin JA: Dawson, Stratas JJA aff’g 2019 FC 1271 O’Reilly J
            2,255,652 / pregabalin / LYRICA

The first half of this decision straightforwardly affirms O’Reilly J on an essentially factual point. The second half has some comments on legal points that I find quite puzzling, though I expect this is simply because the specific arguments the FCA was responding to were not fully set out in this brief decision.

The decision arises out of Pharmascience’s action for damages under s 8 of the NOC Regulations, brought after Pfizer lost in NOC proceedings aimed at keeping Pharmascience out of the pregabalin market. Such damages are assessed using the established “but for” test for causation, under which Pharmascience’s actual sales are compared with the sales it would hypothetically have made had it not been kept off the market during the statutory stay period triggered by NOC proceedings. Pfizer responded by arguing that Pharmascience was disentitled to damages “because the hypothetical sales of PMS-pregabalin would have infringed Pfizer’s patent” [FC 2]. However, Pfizer had never actually sued Pharmascience after Pharmascience launched, and the evidence was that it would not have done so even if Pharmascience had obtained its NOC at the outset of the statutory stay period [FC 3], [3]. Invoking the principle that “the but-for world should reflect, to the extent possible, what happened in the real world,” O’Reilly J held that Pfizer’s defence was not viable [FC 5, 23]. In my view, as discussed here, O’Reilly J’s holding was correct for the reasons he gave. The FCA has now affirmed, “substantially for the reasons given by the Federal Court” [6]. This much is straightforward.

Enforceability of a No-Challenge Clause

Loops v Maxill Inc 2020 ONSC 971 (CanLII)
            2,577,109 / Toothbrush

This motion refusing to grant a partial anti-suit injunction, which would have prevented the alleged infringer from challenging the validity of a US patent in a US court, raises a question regarding the enforceability of a “no-challenge” clause in a settlement agreement. I don’t believe the point has been previously litigated in Canada, though it has been raised in a number of cases in the US. It also illustrates that if a no-challenge clause is to exclude challenges by the party to a settlement agreement, it is best to say so explicitly.

Loops and Maxill are in the toothbrush business [9]. Loops sued Maxill in Canada for infringement of Loops’ 109 patent. In 2014 the parties settled [14]. The Agreement contained a “no-challenge” clause stating that Maxill “would not directly or indirectly assist any person attacking the validity of either [the Canadian 109 patent or the corresponding US Patent 8,448,285" [15]. Maxill then created another toothbrush to try to design around the 109 patent [19]. Loops sued Maxill in Canada over the new toothbrush, this time for breach of the Agreement [20]. Loops also sued Maxill in the US, alleging the same new toothbrush infringed the US 285 patent. Maxill defended on the basis that the new toothbrush did not infringe the 285 patent — but it also attacked the validity of the 285 patent by way of counter-claim [22]. The US actions were consolidated in Washington [23].

Loops brought this motion for an interlocutory injunction barring Maxill from challenging the validity of the US 285 patent, on the basis that this is a breach of the Agreement [1]. Templeton J assessed the motion on the basis that Loops had to show a strong prima facie case on the merits in order to obtain its injunction [6], [32]. She held that Loops had failed to meet this requirement, for two reasons.

Foreign Location of Firm a Factor in C-CEO Designation

Depura Partners LLC v Desjardins General Insurance Inc 2020 FC 261 LeBlanc J
             2,777,931 / System for monitoring vehicle and operator behavior

This decision granted a contested motion to designate certain documents describing technical details of the defendant’s allegedly infringing technology as “Confidential Information – Counsel’s Eyes Only” [C-CEO]. The decision applies established law, but one interesting point is raised on the facts regarding the relevance of foreign residence of firm principals to the C-CEO designation.

The plaintiff is a foreign based firm, and none of the five principals reside in Canada [28]. In granting the C-CEO designation, LeBlanc J rejected the contention that the implied undertaking rule would provide adequate protection, in part because “should I refuse to validate the C-CEO designation of one or any of these documents, the Court would have no meaningful way to control the use, or sanction the misuse, by any of the five individuals that make up the Plaintiff, of the information contained in said documents as these individuals all reside outside Canada and are, individually, not subject to the Court’s jurisdiction” [30]. This consideration was clearly not determinative, as LeBlanc J had held that there was sufficient basis to grant the designation even absent these additional considerations, but it does indicate that the fact that the firm or its principals reside outside of Canada is a factor to be considered in granting a C-CEO designation.

LeBlanc J went on to say “Moreover, any prejudice suffered by the Defendants resulting from a misuse of the information by the Plaintiff could hardly be compensated by any remedy granted by the Court in sanctioning a violation of the implied undertaking rule” [30]. It’s not entirely clear to me whether LeBlanc J meant that the inadequacy of the remedy stemmed from the fact that the principles of the firm reside outside of Canada, or whether this was an entirely separate consideration, to the effect that a breach of the order would constitute a form of irreparable harm.

Protective Orders Clarified

Canadian National Railway Company v. BNSF Railway Company 2020 FCA 45
Boivin JA: Gleason, Rivoalen JJA rev’g 2019 FC 281 Locke J

As discussed here, the law relating to protective orders has recently been in ferment. Traditionally, the court would grant protective orders essentially routinely, particularly on consent or when unopposed, but a series of decisions developed a more restrictive approach, and a split developed in the jurisprudence. In a short decision that will be required reading for all litigators, the FCA has now provided a definitive resolution, largely returning the law to the status quo ex ante, though with considerable clarification of the law. In brief, the FCA held that: the AB Hassle test applies to protective orders and the Sierra Club test applies to confidentiality orders; the two are distinct and the former is much less stringent; and there is no reason why protective orders should not be granted more or less routinely.

There are two key questions. First, what is the test for granting a protective order? A protective order governs the way parties designate and treat confidential information that they exchange between themselves in the pre-trial phase of the action, while a confidentiality order governs the filing of confidential documents and information on the court record. As noted by the FCA at [20], the test applicable to confidentiality orders is set out in Sierra Club 2002 SCC 41 at [53]. This is a relatively stringent test, which requires consideration of the open court principle, weighed together with the commercial interests of the parties in maintaining confidentiality of sensitive material. Protective orders were traditionally granted on the basis of the test set out in AB Hassle (1998) 83 CPR (3d) 428 (FCTD) aff’d [2000] 3 FC 360 (CA) [14]. This test is less stringent than the Sierra Club test, as it focuses on the confidential nature of the information at issue, without consideration of the open court principles.

Confusion had arisen because the Sierra Club decision referred to the AB Hassle decision in a way that was somewhat unclear, and some of the recent FC caselaw had held that the Sierra Club test applies to both types of orders, or that Sierra Club had modified the AB Hassle test. The FCA affirmed that the AB Hassle test and the Sierra Club test are indeed distinct. The former is applicable to protective orders [14] and the latter to confidentiality orders [19]. Sierra Club solely concerned confidentiality orders, and it did not in any way alter the AB Hassle test for protective orders [23].

The confusion arose because the first prong of the Sierra Club test refers to considerations of confidentiality, which are at the core of the AB Hassle test. The FCA explained that the SCC’s reference to AB Hassle was solely in the context of the first branch of the Sierra Club test:

[23] [Sierra Club] does not in any way extend the AB Hassle test, applicable to protective orders, to include a consideration of necessity, alternative measures, or the scope of the order to ensure that it is not overly broad. It follows that the necessity element of the Sierra Club test cannot be said to apply in the context of protective orders, notwithstanding the reference to the AB Hassle test. . . .

The reason for this is straightforward: the open court principle is not implicated by protective orders:

[25] [T]here is no justification for applying the same onerous Sierra Club test that is applied to confidentiality orders to protective orders. Confidentiality orders are squarely meant to circumvent the open court principle, while protective orders are instead used in instances where the open court principle is not engaged.

It was therefore an error of law in this case for the motions judge to conflate the AB Hassle test for protective orders with the more onerous Sierra Club test for a confidentiality order [26].

The second and distinct issue is whether protective orders should be granted more or less routinely, as was the traditional practice, or more sparingly, as some recent cases had held. The FCA clearly signaled that the traditional practice is appropriate (my formatting):

[31] Although the Federal Court is in no way obliged to grant a protective order, I am of the view that there has been no significant and compelling changes to the law that justify the refusal to grant a protective order on consent (or not) if

(i) the AB Hassle test is met and

(ii) the protective order submitted to the Federal Court is in accordance with the protective order template jointly developed over the years between the Intellectual Property Bar and the Federal Court.

[32] Protective orders undoubtedly remain pertinent and useful for intellectual property litigants and there is no justification, legal or otherwise, for stifling this long-standing practice.

The more restrictive approach was driven by concerns about wasted court resources in reviewing protective orders. The FCA remarked that to facilitate the Court’s review the parties should [31] (my formatting):

• provide sufficient evidence in support of their motion for a protective order.

• identify[] the portions of their draft protective order that have been added to the template or removed from it.

The Court also addressed hybrid orders, which contain provisions that govern both confidential information exchanged between parties during the discovery process and confidential information filed with the Court [8]:

[30] The test for granting a hybrid order, in the form I endorse below, remains the same as the test for granting a protective order. As noted, hybrid orders also address materials that might be filed with the Court with a confidential designation. As such, a party who wishes to have the Court treat documents subject to the hybrid order as confidential must bring a motion pursuant to Rule 151 of the Federal Courts Rules forthwith after filing the documents. It is at this juncture, when the Court is being asked to seal documents, that the Sierra Club test set out at paragraph 20, above, is engaged. The motion for a confidentiality order should not automatically be left for the trial judge to determine, but should be filed at the first opportunity.

Knowledge of Infringement Not Required for Inducement

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

In this, my final post on Hospira v Kennedy Trust, I will deal with the knowledge requirement for inducing infringement. The third branch of the Weatherford test for inducing infringement requires that “the influence must knowingly be exercised by the inducer, that is, the inducer knows that this influence will result in the completion of the act of infringement”: 2011 FCA 228 [162]. Locke JA clarified that “the knowledge at issue in the third prong of the test is knowledge that the influence is being exercised, rather than knowledge that the resulting activity will be an infringement.” [45] He noted that some decisions had indicated that knowledge of the patent itself was required, but these suggestions had not been accompanied by a sustained analysis. The most in depth treatment of the point was by Gauthier J (as she then was) in Bauer v Easton 2010 FC 361 [193]-[203], in which, as Locke JA explained, Gauthier J “observed that knowledge that a particular activity is an infringement is not an element of direct infringement and, since inducing infringement is not a tort distinct from direct infringement, it should not be an element of inducing infringement either” [45]. Locke JA agreed [45]. I take it that he intended agreement with her analysis generally, and not just this particular principle. So, there is no requirement of an “intent to infringe” on the part of the indirect party, nor is knowledge of the patent itself required [Bauer 200]. All that is required is knowledge that the actions of the indirect party would induce another to do something that in fact constitutes infringement [Bauer 200]. The third branch would not be satisfied where, for example, a suggestion by the indirect party had been misunderstood, and the misunderstanding had resulted in infringement [Bauer 201]. This is not a very surprising development, but it is nonetheless helpful to have this point affirmed by the FCA. It can now be considered well settled.

Anticipation by Suggestion

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

Locke JA, for the Court of Appeal, held that Phelan J had erred in his novelty analysis [71], and remanded the issue to him for reconsideration [75]. The issue is very interesting and raises a fundamental question regarding the nature of novelty: is an invention anticipated if the prior art suggests that the invention be made, but it has not actually been made as of the claim date?

Kennedy Trust’s 630 patent relates to the treatment of rheumatoid arthritis [RA]. RA is an autoimmune disorder that leads to painful and sometimes debilitating inflammation of the joints. The use of methotrexate [MTX] was well known in the prior art as a treatment for RA, but many patients with RA do not respond completely to treatment with MTX alone and there was therefore a pressing need for an improved treatment. Cytokines are proteins that serve as chemical messengers in the body, and researchers had discovered a number of pro-inflammatory cytokines in tissue samples from rheumatoid joints. It was hypothesized that RA might be treated by blocking the action of the relevant cytokines, thereby suppressing the inflammatory response. The inventors of the 630 patent discovered that TNF-α was a key cytokine that “sat at the apex of an inflammatory cascade.” Centocor (a predecessor to Janssen) had developed infliximab, an anti-TNF-α monoclonal antibody. The inventors of the 630 patent collaborated with Centocor to explore the use of infliximab as a treament for RA. While patients initially responded, the duration of the effect was limited and the patients all relapsed. The inventors then decided to try infliximab in combination with MTX. Trials established that the combination of MTX and infliximab has enhanced efficacy over either drug alone as well as a sustained duration of effect [7]-[8], [FC 9-15].

The successful trials led to the 630 patent. Claim 1 is to the adjunctive use of an anti-TNF-α antibody and MTX for the treatment of rheumatoid arthritis in patients who do not respond fully to MTX alone [FC Appendix B]. Claim 3 of the patent is to the adjunctive use of infliximab in particular, in combination with MTX for the same purpose [FC Appendix B].

Hospira argued that the 630 patent was anticipated by a number of prior art documents and Phelan J had rejected all these attacks [FC 196]. Only two prior art documents were at issue on appeal. One was the “1994 Kennedy Report,” which stated as follows [68]:

The aim is to further investigate the tolerability and efficacy of repeated use of [infliximab] in a randomised, blinded fashion, both in comparison with standard therapy [MTX] and in combination with this drug. It is expected that the results will be available by autumn 1995 and should provide an indication of the likely utility of [infliximab] as a long-term disease suppressing agent in clinical practice.

At the claim date, as the clinical trial was not complete and there were no results [FC 169]. In effect, the 1994 Kennedy Report identified the essential elements of the Claim 3 and says “We are trying this.”

The second item of prior art was Higgins, which “discloses the possibility of combining an anti-TNF-α antibody with MTX” [69]. In effect, Higgins disclosed the essential elements of Claim 1 and suggested “Someone should try this.” The Kennedy Report and Higgins were slightly different, but neither Phelan J nor Locke JA suggested that anything turned on the fact that the trial referred to in the Kennedy Report was actually in progress, and that it was being undertaken by the authors of the report, rather than being a suggestion to others, as in Higgins.

So, the question boils down to this: is an invention anticipated by a prior art document saying “Someone should try X,” where X is the invention?