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.