CAE Inc v Canada (Commissioner of Patents) 2021 FC 307 Manson J
This was a routine correction of inventorship under s 52. Two of the four inventors listed on the priority US application had inadvertently been left off the Canadian application [3]–[5]. The application was supported by affidavits and it was established that the mistake arose through inadvertence. No interesting issues were raised and the application for correction was granted [5].
Guest Tek Interactive Entertainment Ltd v Nomadix Inc 2021 FC 276 McHaffie J
In Guest Tek v Nomadix McHaffie J held Guest Tek’s 760 and 345 patents to be valid but not infringed [284], [437], in a very careful—and long–decision that turned almost entirely on claim construction and the facts. One thing that jumped out is a stylistic innovation, namely the use of italics to indicate claim elements: for example “In my view, the POSITA would understand the notion of user load to be a function of the number of current users and/or their demand” [340]. I love it. For whatever reason, the use of italics rather than more traditional quotation makes the sentences flow more naturally while still retaining all the same information. It also means that quotation marks are reserved for quotations from the evidence, which eliminates ambiguity when a paragraph quotes the experts about the meaning of specific claim terms.
Turning to the substance, Guest Tek and Nomadix each provide network gateway equipment and supporting software to hotels, which allows multiple hotel guests to access the internet through the gateway provided by the hotel [14]. The patented technology relates to network security and bandwidth management. I must say that after reading pharma cases for years, I found the technology at issue in this case a bit difficult to follow. McHaffie J’s decision generally simply applied established law, apart from the points discussed in Friday’s post, but a few points of some interest were raised in respect of claim construction and inducing infringement. The validity attacks on both patents do not appear to have been pursued very vigorously. It seems that Nomadix’s stronger arguments were addressed to the scenario where Guest Tek had prevailed on claim construction and infringement.
Claim Construction
Friday’s post discussed McHaffie J’s conclusion that recourse to the disclosure is always permissible in claim construction, not just when the claim term is ambiguous when read in isolation. However, this holding did not ultimately affect the analysis: there were two cases where reference to the disclosure was necessary to resolve an ambiguity, and reference to the disclosure otherwise simply confirmed the construction arrived at from the claims alone [48].
McHaffie J’s analysis otherwise applied established principles to the facts, but there are a few points of passing interest.
Claim element redundancy
McHaffie J noted that the principle against redundancy is typically applied as between claims (ie, to avoid claim redundancy) “but in my view it has some value in assessing redundancy of elements within a claim” [150]. I don’t think I’ve seen that point made before; it makes sense to me. On the facts, he nonetheless ultimately preferred a reasoning that resulted in claim element redundancy [150]; this is consistent with the general point that the principle against redundancy is an aid to construction and not a strict rule of law.
“First” and “second” distinguish rather than sequence
Nomadix had argued that the reference to “first packets” and “second packets” were used to indicate the sequence of in which the packets were sent. McHaffie J rejected this, holding that the cases “confirm that the terms ‘first’ and ‘second’ are used in the practice of patent drafting as a means of distinguishing elements rather than necessarily sequencing them” [100]. This is not very surprising (and of course there may be patents where the terms are used to indicate sequence), but McHaffie J’s discussion is a good citation on this point if one is needed.
Constructions making infringement impossible are to be avoided
McHaffie J held that a claim should not normally be construed so that no real-world product could possibly infringe [133], [135].
Balance between text and purpose
McHaffie J noted that claim construction requires “a balance between two evocative terms well known in patent law: the Court should construe a patent with ‘judicial anxiety’ to support a useful invention, but if the inventor has created troublesome limitations in the claims, this is a ‘self-inflicted wound’ the Court will not cure” [50]. The decision provided an nice illustration of this balance; at one point McHaffie J adopted a purposive construction, looking to a function of the device to clarify the meaning of an ambiguous term [188], but at the same time, when another element was clear on the text, he hewed to it, even though that might have resulted in a self-inflicted wound [166]– [167].
Inducement
Guest Tek argued that Nomdix induced infringement of the 760 by hotels in Canada, and did not plead direct infringement [202]. The established law of inducement has a three-prong test Corlac 2011 FCA 228 [162], quoted at [56]:
First, the act of infringement must have been completed by the direct infringer. Second, the completion of the acts of infringement must be influenced by the acts of the alleged inducer to the point that, without the influence, direct infringement would not take place. Third, the influence must knowingly be exercised by the inducer, that is, the inducer knows that this influence will result in the completion of the act of infringement.
Ultimately, the inducement argument failed on the first step, as Guest Tek did not establish direct infringement by any Canadian hotel using a Nomadix gateway [255]. Guest Tek argued that direct infringement occurred when a Nomadix gateway is connected to a wireless access point in a network operated by a hotel, but Guest Tek did not call any witnesses from Canadian hotels, or from Nomadix resellers in Canada, to speak to network configuration in Canadian hotels. Instead, Guest Tek relied primarily on the functionality of the Nomadix gateway itself [204]. Ultimately, as I understand it, Guest Tek at most established that it was possible to configure a Nomadix device so that it would infringe, but there was no evidence that it had actually been configured to infringe in any hotel in Canada: see eg [227], [229]. (There are however, a couple of paragraphs that might suggest that the Nomadix gateway could not be configured to infringe: see eg [232], [234]. I’m sure the point would be clear if I understood the technology a bit better.) In any event, whether or not it could be configured to infringe, non-infringing configurations are certainly possible and apparently quite normal. This conclusion followed in part from claim construction; presumably Guest Tek would have had a stronger argument on direct infringement based on functionality alone if it had prevailed on some of the key claim construction issues. (Though I have to admit I didn’t go back to reverse engineer the arguments to be sure.)
Test for causation at the second branch
McHaffie J accepted that the second branch requires a “but for” test for inducement [58]. While that is certainly the standard articulation of the test, in a draft article, “Is 'But For' Causation Necessary to Establish Inducement?” available on SSRN, I have argued that a material contribution test for causation should be used at the second stage, though “but for” causation is still required to establish damages. Given McHaffie J’s holding on direct infringement, this point did not arise. Moreover, McHaffie J held that Guest Tek “has not established that Nomadix influenced Canadian hotels to configure their wireless access nodes in this way or any particular way” [245], [247], [248]. Consequently, inducement would not be established even on the material contribution test that I proposed in my article; that test comes into play, for example, where the defendant had clearly instructed the direct infringer to use the product so as to infringe, but it is not clear whether the direct infringer paid any attention to those instructions. That is, my argument is that inducement sufficient to support injunctive relief should be established if the indirect party sold a product along with instructions to infringe, and the direct infringer did in fact infringe, whether or not the direct infringer read the instructions. The effect would be that an indirect party could sell a product that could be used to infringe, but would not be allowed to provide instructions to infringe. Damages would still require “but for” causation, not as a matter of the test for inducement, but as a matter of the test for damages.
Contributory infringement
McHaffie J was also kind enough to refer to my article Contributory Infringement in Canadian Law (2020) 35 CIPR 10 (draft version here). In that article, I noted that Canadian courts have consistently expressly said that there is no liability for contributory infringement—see eg MacLennan v Produits Gilbert 2008 FCA 35 [33], but I argued that nonetheless, the reasoning and results in almost all the leading cases support a rule that supply of a product especially adapted to infringe, and with no substantial non-infringing use, constitutes indirect infringement, even in the absence of active inducement. (The exception is Slater Steel (1968), 55 CPR 61 (Ex Ct), which I argued was wrongly decided). McHaffie J remarked while my article was interesting, he agreed with Nomadix “that the FCA has confirmed ‘contributory infringement’ is not recognized as a cause of action in Canadian law,” citing Nycomed 2012 FCA 195 [3]. Now that’s certainly true in terms of express statements of the law; my argument is that it would be open to the FCA to recognize contributory infringement in light of the reasoning and results in the leading cases; but given the express statements of the law, such as that in Nycomed, it would probably be up to the FCA to recognize the point.
In any event, the issue didn’t arise in this case. The issue of contributory infringement arises when the product sold is not in itself patented, but is especially adapted to infringe; the question is whether indirect infringement can be established by mere sale of a product that “cannot be used for any other purpose,” as the FCA put it in MacLennan, even in the absence of a separate act of inducement. As noted above, in this case the inducement allegation failed because Guest Tek did not even establish direct infringement: “As the evidence does not establish Nomadix influenced Canadian hotels with respect to these issues, it equally does not establish any direct infringement would not have occurred but for that influence” [250]. The Nomadix gateway was clearly not a product especially adapted to infringe, or that could not be used for any other purpose; non-infringing configurations were possible and normal. Therefore the issue of contributory infringement does not arise, and it would have made no difference to the outcome or the reasoning if McHaffie J had accepted my argument.
Guest Tek Interactive Entertainment Ltd v Nomadix Inc 2021 FC 276 McHaffie J
There has been an on-going debate in the case law as to whether recourse to the disclosure is always permissible in claim construction, or is permissible only if the claim terms are ambiguous. In Guest Tek McHaffie J contributed to this debate with a careful and principled analysis of the jurisprudence, including a discussion of a somewhat ambiguous paragraph in Tearlab 2019 FCA 179 [33] that both parties had relied on.
McHaffie J concluded as follows:
[47] Ultimately, I conclude from the foregoing that the exercise of construction must consider both the disclosure and the claims, with the claims being purposively construed in the context of the patent as a whole and in light of the CGK of the POSITA. However, the focus remains on the language of the claims, which defines the scope of the monopoly. The disclosure should not be used to enlarge or contract the scope of the claims, particularly through the addition of words or limitations not found in the claims.
I agree entirely both with McHaffie J’s conclusion and his analysis, which I’ve reproduced below the fold. I’ve argued to that effect in my posts on the topic (though I somehow completely missed the key passage from TearLab in my post on that decision). I am having a hard time keeping track of where every FC judge stands on the issue, but my sense is that the recent trend is to the view that the claims must always be construed in light of the specification as a whole, as McHaffie J concluded: see eg Grammond J in Bauer Hockey 2020 FC 624 (here) and Manson J in Viiv v Gilead 2020 FC 486 (here).
dTechs EPM Ltd v British Columbia Hydro and Power Authority 2021 FC 190 Fothergill J
2,549,087 / Electrical Theft Detection System
I had intended to return from my blogging break with a post on the “inventive concept” aspects of Apotex v Shire 2021 FCA 52. That is turning into a bigger project than anticipated. I’ll have a few posts on that issue in another week or two. In the meantime I’ll catch up on the decisions that came out while I was on break, starting with dTechs.
In this decision Fothergill J held dTechs’ 087 patent to be not infringed, and also invalid for anticipation and obviousness. The decision turned almost entirely on claim construction and the facts. There were two legal points of interest, though the decision did not turn on either of them. First, Fothergill J held one of the claim elements to be non-essential. This is not unheard of, but unusual enough to be noteworthy. Of more general interest going forward, while Hospira 2020 FCA 30 held that obscure prior art is now part of the state of the art for the purposes of an obviousness attack, Fothergill J understood it as holding, or at least suggesting, that mosaicing of obscure prior art is not permitted.
The 087 patent relates to a system for detecting the theft of electrical power, such as by illegal marijuana grow-ops. The system works by monitoring the current power consumption at a primary line, that serves a number of downstream transformers, and comparing it to “known consumption patterns” to detect atypical power consumption patterns that might indicate power theft. The inventor and founder of dTechs was a former police officer who had become interested in the identification of marijuana grow operations by tracing the electricity theft during his investigations into organized crime and illegal drugs. He eventually quit the force to set up dTechs and commercialize his invention. The defendants were Awesense, which provided a similar system to BC Hydro, and BC Hydro itself. As usual, the defendants argued non-infringement and invalidity.
Infringement turned entirely on claim construction. Fothergill J adopted a construction of the term “known consumption patterns” that favoured the defendants [153], and non-infringement followed directly [174]. The main point of interest on claim construction was that Fothergill J held a different term, “notifying the utility” to be non-essential, applying the Free World 2000 SCC 66 test for essentiality [154–61]. This is noteworthy because it is quite unusual for a claim term to be held to be non-essential. However, this holding did not make any difference to the result, which turned entirely on the construction of “known consumption patterns.”
In a second point of interest, Fothergill J noted at [248] that in Hospira 2020 FCA 30 [86] the FCA held that all prior art should be considered part of the state of the art for the purpose of an obviousness attack, and not just prior art that would have been discoverable on a reasonably diligent search: see here. It’s convenient to refer to prior art that would have been discoverable on a reasonably diligent search as ‘obscure prior art.’ However, in Hospira “the Federal Court of Appeal acknowledged that the discoverability of a prior art reference may be relevant to the fourth step of the obviousness analysis” [249], in the following passage:
[86] The likelihood that a prior art reference would not have been located by a PSA may be relevant to consideration of step 4 of the obviousness analysis (whether differences between the state of the art and the inventive concept constitute steps which would have been obvious to the PSA) in that the uninventive PSA might not have thought to combine that prior art reference with other prior art to make the claimed invention.
In my post on Hospira I noted that “This indicates that there can be no mosaicing of prior art that is not available in a reasonably diligent search.” The point was made somewhat tentatively in Hospira, with the FCA saying that the fact that the prior art is obscure “may” be relevant and that the skilled person “might” not have thought to combine the obscure prior art references. It was not entirely clear whether the FCA was stating a rule of law that mosaicing of obscure prior art is not permitted, or merely suggesting that that would be an issue to be considered on the facts. The “may” and “might” language suggests it is a factual issue, but if so, it is a very hypothetical matter of fact, given that in fact, the skilled person would not have found the obscure prior art as well. It’s a bit convoluted to say that there is a factual issue as to whether the skilled person would have thought to combine two pieces of prior art which she would not in fact have been aware of.
In any event, Fothergill J remarked that “[250] Even if the PSA lacks the ingenuity to combine more than one prior art reference to achieve the claimed invention” the claimed invention would nonetheless be obvious. So, he did apparently understand Hospira to be saying that mosaicing of obscure prior art is not permitted, though his holding that the 087 patent was obvious did not turn on the point.
Fothergill J also held that certain of the asserted claims were anticipated by BC Hydro’s prior practices. While those practices did not reflect the preferred embodiment of the invention, Fothergill J held on the facts that the prior practice would have necessarily infringed and so satisfied the test for anticipation [183], [192], [204]. Most of the asserted claimed were also anticipated by a report prepared by the inventor himself during his time on the police force, which proposed a system that eventually matured into the invention. One key issue on this point was whether the disclosure of the report to the police force was subject to an expectation of confidence. Fothergill J held on the facts that it was not: [209–12], [218]. Most claims were also anticipated by a prior publication, again following on the claim construction holdings and the rule that that which infringes if after anticipates if earlier [219]–[235].
I’ll be taking a blogging break for a couple of weeks to catch up on other tasks. When I get back, I’ll start with a post on the “inventive concept” aspects of Apotex v Shire 2021 FCA 52.
Mud Engineering Inc v Secure Energy Services Inc 2020 FC 1049 Aalto CMJ
As discussed here, Stratas JA’s decision in Salt Canada 2020 FCA 127 clarified previously unsettled law by holding that the Federal Courts always have jurisdiction to determine ownership of a patent pursuant to s 52, overruling prior caselaw which held that the FC lacked jurisdiction when the matter relates “primarily” to contract law. This case provides an excellent illustration of the shortcomings of the prior law and shows that the salutary effects of Salt v Baker are already being felt.
Prior to the decision in Salt Canada, Mud Eng brought an action alleging infringement by Secure Energy, which in turn defended on the usual grounds of non-infringingement and invalidity [5]. But Secure Energy also alleged that it was the rightful owner of the patents at issue [5]. If it was, that would likely end the litigation [29]. But before deciding who owned the patents, the parties faced the problem of figuring which court should decide who owned the patent. One problem with the prior law is that the FC lacked jurisdiction in some cases, forcing the parties to litigate in two venues. And to make things even more complicated, the nature of the test for FC jurisdiction turned on the fact-specific question of whether the matter “primarily” related to contractual interpretation, so it was difficult to know, without litigation, whether the FC had jurisdiction.
Because of that uncertainty, an action was commenced in the Alberta Court of Queen’s bench, with the result that the parties were engaged in actions with identical allegations in both the Federal and Alberta courts. My impression is that both parties would have been happy to litigate in the Federal Court, given its expertise in patent law and the fact that its judgment can be enforced nationwide [12], but they did not want to bounce back and forth between the two. Mud Eng brought an application before Ashcroft J in the Alta QB to stay the Alberta action in favour of the Federal Court. The motion was brought prior to the decision in Salt Canada, and the motion was refused on the basis of the uncertainty with respect to the jurisdiction of the Federal Court in these matters [9]. This illustrates the very unsatisfactory nature of the prior jurisprudence; Ashcroft J was not able to determine what view the Federal Court would take of the Federal Court’s jurisdiction. In dismissing the stay application, Ashcroft J invited the parties to seek a preliminary determination from the Federal Court on the issue of jurisdiction [10], indicating that she would be willing to reconsider her decision on the stay in light of the result.
This invitation was taken up by Mud Eng in the present application for a determination of a point of law. Mud Eng argued that the Federal Court did indeed have jurisdiction; and Secure Energy did not oppose the motion, reinforcing the point that lack of clarity in the law is the real problem: [11]–[12].
Aalto J had no difficulty in deciding that the Federal Court did indeed have jurisdiction in this case, holding that Salt Canada “is a complete answer to the jurisdictional issue” [14]. Aalto J decided the matter as a question of law under Rule 220, rather than by way of a declaration, which “ensures that this Order will not be construed as case specific” [20]. Consequently, we may hope that in the future such orders will not be necessary, as the parties will be able to have confidence that the Federal Courts will take jurisdiction in these types of cases. The benefit of Salt Canada is not only in preventing duplicative litigation, but also in promoting predictability in the law, thereby promoting settlement and reducing the cost of litigation.
Aalto J also addressed a legal point of interest. In its counterclaim arguing that the FC did not have jurisdiction, Secure Energy stated that the claims “are not ancillary to any matter within the jurisdiction of the Federal Court.” Aalto J noted that this engages the three-part test set out in ITO [1986] 1 SCR 752. Aalto J explained that:
[25] ITO, and the jurisprudence flowing from it, allows the Federal Court to assume jurisdiction in a matter over which it does not have direct statutory jurisdiction if the matter is “ancillary” to a claim properly within the jurisdiction of the Federal Court. Secure Energy argues that the Federal Court does not gain jurisdiction over ownership of patents through contract interpretation as an ancillary issue to patent infringement. Notably, ITO was not discussed or referred to by Justice Stratas in Salt Canada. For good reason, there was no need to discuss the jurisdiction of ownership of patents through ancillary means when the jurisdiction of the Federal Court is clear pursuant to s. 52 of the Patent Act.
I must admit that I have struggled a bit to understand the place of the ITO test, and I was wondering why it had not been addressed by Stratas JA in Salt Canada. I’m pleased to have this point clarified, at least in my own mind.
PS: I'm still working on my post on the inventive concept aspect of Apotex v Shire 2021 FCA 52. It might take a while.
Apotex Inc v Shire LLC 2021 FCA 52 Rennie JA: de Montigny, Gleason JJA affg 2018 FC 637 Fothergill J
2,527,646 / lisdexamfetamine [LDX] / VYVANSE / NOC
Rennie JA’s decision for the FCA is noteworthy in three respects. First, Rennie JA held in the clearest of terms that nothing turns on whether a patent is characterized as a selection patent. This is a welcome reaffirmation of prior holdings to much the same effect, but this decision is important because the issue was central to the appeal and the FCA’s holding was so unequivocal. The issue can now be considered settled, as I’ll discuss in this post. Second, Rennie JA provided an extensive discussion of the role of the inventive concept in the obviousness analysis. In many ways this discussion is a helpful clarification of the law, but I must admit that there are some aspects of the decision that make me nervous. I’ll have another post on that issue.
Third, Rennie JA reaffirmed that the various “obvious to try” considerations factors set out in Sanofi 2008 SCC 61 [69]–[70] are factors, not requirements, and they need not all be met [106]–[107[. Normally I would devote a post to this aspect of the decision, but I discussed the issue at length in my very recent post on the decision of Locke JA (Webb, Boivin JJA concurring) in Zytiga 2021 FCA 45, which addressed the point at greater length. The decision of Rennie JA in this case appears to me to be entirely consistent with that in Zytiga, so I won’t blog separately on this aspect of the decision. The important point is that we now have two separate panels of the FCA expressing the same view. In Zytiga Locke JA stated that “I maintain my view that ‘more or less self-evident that it ought to work’ should be treated as a factor in the obviousness to try analysis, and not as a requirement” [36]. This way of putting it suggested that there might be some question as to how widely that view is shared. In light of Rennie JA’s decision in this case, I think this point too can now be considered settled.
As discussed in my post on Fothergill J’s decision, the 646 patent relates to the compound LDX and its use for treating ADHD. Amphetamines have long been used to treat ADHD, but they can be abused by snorting or injection. LDX provides a solution to that problem in the form of an abuse-resistant sustained release prodrug [31]. The main validity attack was based on AU Patent No 54168/65, which disclosed a very large class of related compounds. None of the specific examples disclosed LDX itself, but LDX was included in as one of the many possible configurations in the “advantageous” class described on page 4 of AU 168 [FC 104]. The advantages of LDX as a solution to the problem of amphetamine abuse were not described in AU 168 [FC 108], and the compounds were not even identified as prodrugs [FC 107]. The thrust of AU 168 was that the disclosed compounds might be useful as appetite suppressants that are substantially free of CNS stimulatory activity [FC 106].
There was a question as to whether the 646 patent was a selection patent over AU 168. Fothergill J found it unnecessary to decide this question [29], [FC 98], essentially on the view that nothing turned on that point:
[FC 97] By statute, the basis for assessing anticipation cannot depend on whether the patent is a selection patent or not. The jurisprudence does not imply that anticipation and obviousness in respect of a selection patent are to be assessed over the genus patent from which it is a selection, rather than over the prior art read as a whole. A selection patent “does not in its nature differ from any other patent” (Sanofi-Synthelabo at para 9), there is no reference to selection patents in the Patent Act, and the conditions for a valid selection patent do not constitute an independent basis upon which to attack the validity of a patent. A selection patent, like any other patent, is therefore vulnerable to any attack set out in the Patent Act, but no other.
Apotex argued that this was an error, and that it does matter whether the 646 patent is a selection patent. In particular, Apotex argued that the advantageous properties of a compound over the prior art may only be considered if the patent is a selection patent over that prior art; otherwise, only the bare chemical formula should be considered [19].
Rennie JA firmly rejected this argument. While he did not specifically refer to Fothergill J’s remarks at [FC 97], his holding is very much to the same effect:
[31] There is no magic to the term “selection patent”. . . . The Patent Act does not refer to selection patents and the jurisprudence is clear that a selection patent does not differ in substance or form from other patents.
[32] A selection patent is subject to the same requirements and vulnerable to the same attacks as any other patent, including attacks based on anticipation and obviousness. [T]he failure of a judge to characterize a patent one way or another . . . is not an error of law. Put otherwise, a finding that the characteristics of a selection patent have, or have not, been met, “does not constitute an independent basis upon which to attack the validity of the patent”
[34] As noted, the validity analysis does not change depending on whether the patent was formally classified as a selection patent or not.
[35] There is no divergence between the requirements for a valid patent claim depending on whether it is found in a selection patent or not.
This seems to me to be entirely right.
But there is a loose end. Rennie JA did not directly explain how his holding could be reconciled with the fact that the SCC in Sanofi 2008 SCC 61 [10]–[11] endorsed the three factors set out by Maugham J in IG Farbenindustrie (1930) 47 RPC 289 (Ch). I’ll make an attempt.
The obvious way to reconcile the IG Farbenindustrie factors with the view that there is nothing special about selection patents is to suggest that those factors are simply an alternative articulation of the standard analysis in the specific context of selection patents. This was evidently Rennie JA’s view: “classification contextualizes what specific claims profess to do while also making it easier to compare the facts of the particular case before the Court to other previous fact scenarios” [33].
This was also apparently the view of Maugham J: “I think it would be unwise to endeavour to state in definite language all the conditions on which a selection patent must depend; for after all a selection patent does not in its nature differ from any other patent and is open to attack on the usual grounds of want of subject-matter, want of utility, want of novelty and so forth” (322)’ the same view was also suggested in Sanofi [9], quoting part of this passage.
With that in mind, consider the factors themselves, as set out in Sanofi [10]:
1. There must be a substantial advantage to be secured or disadvantage to be avoided by the use of the selected members.
While the tripartite IG Farbenindustrie test was often referred to, this first factor was undoubtedly the most important, as it was the factor that was normally actually applied (along with Maugham J’s statement at 321, which is not part of the tripartite test as such, that “the selected compounds have not been made before, or the patent would fail for want of novelty.”) It is therefore fortunate that this factor is easy to reconcile with a standard analysis. It was explicit in both IG Farbenindustrie and Sanofi that this is a reflection of the inventive step requirement: “If the selected compounds. . . possess a special property of unexpected character. . . I cannot see that the inventive step essentially differs from the step involved in producing a new result by a new combination of well-known parts . . . in mechanics in the construction of a new machine” (321), quoted in part in Sanofi [9]; “if for practical purposes it is not obvious to skilled chemists in the state of chemical knowledge existing at the date of a selection patent that the selected components possess a special property, there is then, or at least there may be, a sufficient ‘inventive step’ to support the Patent” (322). The idea is that if the originating patent disclosed a large class of compounds and disclosed that they are all, eg antipsychotics with moderate to severe side-effects, there is nothing inventive in pulling one at random out of the class and establishing that it is an antipsychotic with moderate to severe side-effects. An arbitrary selection is not inventive.
The second factor is as follows:
2. The whole of the selected members . . . possess the advantage in question.
This is trickier. Maugham J stated that if this is not satisfied, “the patent would be misleading and would also fail for insufficiency and non-utility.” Unfortunately, Maugham J did not provide any further details, and it is not immediately clear how the patent would fail in light of English patent law of the day. In modern Canadian law, “misleading” patents are dealt with under s 53, which now has a well-developed body of jurisprudence. To the extent that the second factor was intended to address such problems, it must considered to be displaced by the statutory provision of the Canadian Act. I have to admit it is not clear to me why the patent would be insufficient; a failure of the second factor would not affect the classic “how to make” enablement. There are other aspects of the English sufficiency law of the day which Maugham J might have had in mind, eg ambiguity. The law of utility has also developed considerably since 1930, and arguably if the genus claim in the originating patent was valid, all the claimed compounds which it encompassed must have been useful, and it is hard to see how they would become less useful simply because some other compounds are more useful.
With all that said, it is clear that Maugham J considered his second factor to be nothing more than the application of general principles to the context of selection patents. To the extent that modern Canadian law has diverged from century old English law, then it seems plain that our modern law should govern; it would be wrong to regress—or worse, displace statutory provisions—by adhering to a test for selection patents that was based on century old English law.
On to the third factor:
3. The selection must be in respect of a quality of a special character peculiar to the selected group.
Maugham J at 323 indicated that this was not based on established principles, but was rather his own analysis. It not clear whether this was ever good law. I am not aware of any case which has actually applied this factor to hold a patent invalid. Moreover, this factor was also criticized on substantive grounds by the EWCA in Dr Reddy’s [2009] EWCA Civ 1362 [39], which also held that the whole IG Farbenindustrie test was no longer part of English law.
None of this conflicts with the SCC holding in Sanofi. The only one of the three factors actually applied was the first—see eg [31], [31], [41]— which, as discussed above, is clearly based on the standard non-obviousness requirement. Moreover, while the SCC in Sanofi certainly spoke favourably of Maugham J’s analysis, the Court did not go so far as to say that the tripartite test had to be satisfied as a matter of law. Rather, the SCC stated that it is “a useful starting point for the analysis to be conducted in this case.” [11]. Experience has shown that it is not a particularly useful starting point in most other cases. It is not contrary to Sanofi to recognize that fact.
Apotex Inc v Eli Lilly Canada Inc 2021 ONSC 1588 Schabas J
2,041,113 / olanzapine / ZYPREXA
Under the patent linkage system established by the PM(NOC) Regulations, a patent that is ultimately held to be invalid can keep competitors off the market for two years by operation of the statutory stay pursuant to s 7(1)(d). If the generic prevails, s 8 provides a remedy in the form of damages for the losses suffered from having been kept off the market by the statutory stay. There are limitations to the s 8 remedy which are now clearly established. First, if the generic prevails in the s 8 proceeding, s 8 entitles it only to its own damages, and not disgorgement of the patentee’s profits: 2011 FCA 358 (here); 2013 ONCA 555 (here). Second, if the generic is unsuccessful in the NOC proceeding, it cannot claim s 8 damages, even if the patent is subsequently held invalid in an infringement action: 2013 FCA 282 (here). A number of actions have been brought in provincial superior courts pleading a variety of causes of action (other than s 8), seeking a way around both of these limits. So far, none of these attempts to avoid the limits on s 8 recovery have been successful, though some causes of action have survived a motion to strike. Other causes of action have been struck, or class certification refused on substantive grounds: see here for a summary as of Aug 2016, and here and here for discussion of two decisions since then. (I think that is a complete list, though I won’t make any promises.)
In this case, Apotex sought to avoid the second limit on s 8 damages. Lilly had prevailed in NOC proceedings against Apotex ( 2007 FC 455 affd 2008 FCA 44), but 113 patent was subsequently declared invalid in separate proceedings (2011 FC 1288 affd 2012 FCA 232): [10]–[23]. (As Schabas J noted [23], the 113 patent was invalidated on the basis of the promise doctrine—see here—which was subsequently abolished by the SCC in AstraZeneca 2017 SCC 36, so it appears that the 113 patent would be valid under current law. Nothing turned on this point.) Apotex had attempted to claim s 8 damages in Federal Court proceedings, and it was that litigation, culminating in 2013 FCA 282, that established that s 8 recovery is not permitted in those circumstances.
In this action, Apotex sought to recover damages for having been kept off the market on the basis of three causes of action: breach of the Ontario Statute of Monopolies; s 7(a) of the Trademarks Act; and common law conspiracy in restraint of trade [34]–[36].
Schabas J dismissed the action on a motion for summary judgment, holding that none of these causes of action raised a genuine issue for trial. There were two preliminary points: whether the matter should be dealt with by way of summary judgment (yes), and whether the limitations period had run (no), which I won’t address, as the former is not patent specific and the latter is only relevant to the old NOC proceedings.
Schabas J’s holding rested primarily on two general points.
First, the PM(NOC) Regulations are a “complete code” which comprehensively sets out the remedies available to the parties. The underlying NOC proceedings in this case were standard NOC proceedings of the kind that would have been directly within the contemplation of the legislature. To provide additional remedies which are not found in the Regulations, in circumstances that undoubtedly were contemplated by the drafters, would upset policy choices and balancing of interests arrived at by Parliament: [110] and generally [97]–[110], [114]. As Schabas J pointed out, this reasoning has been accepted in all of the highest authorities to consider the question in this context.
In my view this logic is sound. Since I’m an academic, I have to quibble a tiny bit. Schabas J stated a few times, including at the very outset of his analysis, that “patent law is ‘wholly statutory’” [97], [110]. Yes, that is quoting the SCC in Sanofi 2008 SCC 61, which in turn quoted Lord Walker’s decision in Synthon [2005] UKHL 59, but Apotex nonetheless is right to say that this is an “overstatement” [98]. For example, all of the law of utility, including the doctrine of sound prediction and its enhanced disclosure requirement (if that exists), and the prohibition of post-filing evidence, rests on a single word in the Act; the obviousness requirement was not in the code at all until 1993, despite having been part of the law for a century before that. The Supreme Court in Sanofi used this phrase to indicate two somewhat narrower points: first, that there is no common law right to a patent; and second, that specific statutory provisions will always prevail over judicially developed doctrines. Both of these points are unassailable, and neither rests on the notion that the Act is a complete code in a strong sense. Lord Walker’s statement in Synthon [57] is particularly curious:
The law of patents is wholly statutory, and has a surprisingly long history. It has been wholly statutory since the Statute of Monopolies 1623, an important landmark in constitutional history because of its effect in curbing the royal prerogative.
As Lord Walker states explicitly, the Statute of Monopolies did nothing but curb the royal prerogative. Even after the Statute of Monopolies, the basis for the grant in English law rested on the exercise of the royal prerogative and not on the statute: in principle, this was true in the UK until the Patents Act 1977. The Crown could, and occasionally did, refuse to grant patents for general policy reasons, such as protection of tax revenue, which had not even the slenderest basis in the Statute of Monopolies. Thus the very basis of the grant was not statutory. Moreover, the Statute of Monopolies itself is and was at the time generally considered to be a reflection of the common law. Indeed, Dr Fox has gone so far as to say that the Statute of Monopolies “was not by any means enacted as a patent statute having as its primary purpose the establishment of a system whereby letters patent might be obtained for meritorious inventions. It was enacted as the result of a long and turbulent agitation against the abuse of monopolies of all kinds as well as other grievances which are set out in the preamble to the Act”: Fox, “Abuse of Monopoly”(1945) 23 Can Bar Rev 353, 371. Consequently, Lord Walker’s statement that patent law “has been wholly statutory since the Statute of Monopolies 1623" is a bit of a stretch.
With that said, Schabas J’s decision does not rest on the view that the entirety of patent law is statutory. It rests on the much narrower ground that the balance of interests struck in the PM(NOC) Regulations, and the remedies provisions in particular, are a complete code for addressing the harm done by the statutory stay. That is the main point made by the authorities quoted and relied on by Schabas J. This narrower point is entirely compelling. The PM(NOC) Regulations were high profile enactments which were heavily lobbied. They reflect a political compromise between the interests of the generics and the innovators, and more broadly “a compromise between the interests of the public in encouraging research and development of new patentable drugs and in encouraging generics to market drugs at lower prices” [106]. I won’t multiply references on this point, as it is made in all of the decisions quoted by Schabas J, noting eg the “highly regulated” nature of this field [109].
I’ll add one point that wasn’t mentioned in the decision. It is widely recognized that the statutory stay "is tantamount to an interlocutory injunction": Bayer AG v Apotex (1993) 51 CPR(3d) 329 [13]. While the 1993 RIAS is not explicit, it appears that the NOC proceedings under the original regulations were broadly modeled on an interlocutory injunction application (in contrast to the deemed infringement approach under the US Hatch-Waxman system and under the new NOC proceedings). So, in addition to the stay, the proceeding was summary in nature, and the fact that the outcome had no in rem effect is also similar to an interlocutory injunction application. A defendant may also suffer loss from being enjoined by an interlocutory injunction if it turns out that the injunction was ‘wrongly’ (with the benefit of hindsight) granted, and it is very well-established that the party subject to an interlocutory injunction has no common law right to damages for its loss. This is because the loss is due to an order of the court, not the action of the plaintiff. The defendant will only be compensated if an undertaking is given, as is normally required. Section 8 damages play the role of damages on the undertaking; and to the extent that the proceedings were indeed modeled on an interlocutory injunction, the parallel implies that the background assumption is that there would be no recovery other than that provided for by s 8, just as there is no recovery for the harm caused by an interlocutory injunction apart from that provided for by the undertaking.
The second general point made by Schabas J is that Lilly cannot be made liable for exercising its statutory rights [113]–[118]. The direct cause of the loss to Apotex is the statutory stay. The stay is indirectly caused by Lilly listing the 113 patent, and then responding to Apotex’s NOA. While Lilly was not required to list the 113 patent, it was entitled to do so: “such acts ‘were the opposite of unauthorized’ and were acts that Lilly ‘was at liberty to commit’” [118], quoting Harris 2010 ONCA 872 [50] affg 2010 ONSC 2326 [94]. This is true “even if Lilly was motivated by an improper motive” (on which there is no evidence) [111].
This reminds me broadly of the US Noerr–Pennington doctrine, which is to the effect that it is not actionable under the antitrust laws to petition government to enact anticompetitive legislation, even if the intent is to eliminate competition: Noerr 365 US 127 (1961); Pennington 381 US 657, 670 (1965). The parallels are not exact, as Noerr and Pennington themselves are about petitioning government in the antitrust context specifically. But there is a broad parallel in the idea that petitioning the government in respect of legislation cannot be actionable in a democracy (Noerr 137–38), and similary taking advantage of one’s rights under legislation should not be actionable. The lower federal courts in the US have consequently expanded that immunity far beyond the antitrust context to a wide variety of claims: see Gugliuzza, Patent Trolls and Preemption, (2015) 101 Va L Rev 1579, 1611–12. Moreover, the Court noted in Pennington 671 that “it is clear under Noerr that Phillips could not collect any damages under the Sherman Act for any injury which it suffered from the action of the Secretary of Labor. The conduct of the union and the operators did not violate the Act, the action taken to set a minimum wage for government purchases of coal was the act of a public official who is not claimed to be a co-conspirator, and the jury should have been instructed, as UMW requested, to exclude any damages which Phillips may have suffered as a result of the Secretary’s Walsh-Healey determinations.” That is, if the direct cause of the injury is the operation of the legislation, the injured party cannot claim damages against the legislator, and any improper motive in petitioning for the legislation is vitiated by the intervention of the legislator itself. The principle applies not only to petitioning a legislative body, but also petitioning a court for relief, unless the litigation is a “sham”: see Professional Real Estate Inventors v Columbia Pictures 508 US 49, 56–58 (1993). More broadly, in the United States under Noerr-Pennington and related doctrines, a patentee is generally immune from civil liability for harm arising from assertions of infringement so long as the assertions are not (1) objectively baseless and (2) made with subjective ill intent: see Gugliuzza, Patent Trolls and Preemption, 1616–28. While there is room for debate about whether the precise contours of the US rule are sound as applied in the patent context (see Gugliuzza, arguing that threats made in bad faith should not be immune from liability), that is not relevant here as there is no question of objective baselessness or ill intent on the facts at hand. (Indeed, as noted above, the patent at issue would probably be valid under existing law.)
I’m not sure how much this parallel adds, but in any event, I do find the basic point made by Schabas J and Harris—that it cannot be actionable to take advantage of one’s statutory rights—to be entirely convincing.
It seems to me that these points are independent, and either would be sufficient to dispose of Apotex’s claim. The policy balance struck by the legislature happens to be triggered by the pharma innovator listing its patent; but even if there were some other trigger, the policy balance still shouldn’t be upset. Conversely, if listing is authorized under the Act, it shouldn’t give rise to liability, even if there weren’t a comprehensive balance backing it up. But that’s an issue for another day, as here the two principles did work in tandem.
So at this point there is a strong argument for dismissing Apotex’s action—and I haven’t even discussed the actual causes of action themselves, except in passing at the outset. Schabas J’s decision proceeded similarly: he apparently held that the claims were not tenable even before considering the specific causes of action [122], though he did go on to consider the specific causes of action, and concluded that none of them could be supported on the evidence or the law. While this approach is a bit unorthodox, it strikes me as sound. At the very least, the general principles establish that the claims should be dismissed unless examination of the specific causes of action shows some good reason to the contrary.
The first cause of action was for breach of s 4 of the Ontario Statute of Monopolies, which provides (in part),
If any person shall be . . . grieved . . . by [any] letters patents . . . tending as aforesaid, . . . the same person shall have his remedy . . . against him by whom he shall be so . . . grieved . . . and every such person . . . shall recover three times so much as the damages which he sustained by . . . occasion of being so . . . grieved
This is essentially identical to s 4 of the original English Statute of Monopolies (barring some transitional language in the original statute). As I understand it, there was some controversy as to whether various Imperial statutes affecting property and civil rights became part of the law of Canada ex proprio vigore. To resolve the uncertainty, “An Act respecting the Imperial Statutes relating to property and civil rights” SO 1902 c 13, was enacted, confirming that certain listed Acts were part of the law of Ontario. The Ontario Statute of Monopolies was made part of the RSO 1897 under the authority of that Act: see Fox, “Abuse of Monopoly” (1945) 23 Can Bar Rev 353, 363–64. The Ontario Statute of Monopolies has never been judicially considered until this recent spate of proceedings. Section 4 of the original English statute appears to have been judicially considered exactly once in the 400 years since it was enacted, in Peck v Hindes (1898) 15 RPC 113 (QB) (see 117 indicating that it was the first time the provision had been considered).
There are serious questions as to the validity of the Ontario Statute of Monopolies, which Schabas J found it unnecessary to address in light of his conclusion that the provision, even if validly enacted, did not support Apotex’s claim in the circumstances [127]–[130]. I’ll note that Dr Fox was firmly of the view that it was intra vires: see “Abuse of Monopoly” at 370–72
Apotex’s argument, as I understand it, is that Apotex was “grieved” by the 113 patent, by virtue of having been kept off the market. Section 6 of the Statute of Monopolies (s 5 of the Ontario Statute) provides that s 4 does not apply to any letters patents granted to the true and first inventor of for new manufactures; but this exception, so the argument goes, should be interpreted as only applying to valid letters patent, so that patents that granted but which are ultimately held to be invalid are subject to s 4. This is a purely textual interpretation of s 4, and it must be said that a purely textual parsing of an obscure 400 year old statute is a very slender ground for disrupting the legislative balance struck by the NOC Regulations.
The historical intent of s 4 is obscure. In Peck v Hindes, counsel argued at 124–25 that s 4 was aimed at extrajudicial enforcement of patent rights; that was not accepted (or rejected) by the court, and even if correct, that theory of s 4 would not support a cause of action on the present facts. Mathew J in Peck v Hindes concluded at 127 that s 4 did not apply at all to letters patent for invention. The famous s 6 of the original Act (s 5 of the Ontario Statute, as s 5 of the original Statute was transitional), the foundation of the law of patents, provides an exception for letters patent for invention in the following terms: “any declaration before mentioned” —including s 4—”shall not extend to any letters patents. . . made. . .of the sole working or making of any manner of new manufactures.” The Court in Peck v Hindes observed that “Section 6 does not say anything about valid Letters Patent. It says, Letters Patent for new inventions” (127). Schabas J agreed with this holding [135].
The only scholarship I have been able to find that considers the effect of s 4 is series of articles by Dr Fox, primarily “Abuse of Monopoly”(1945) 23 Can Bar Rev 353; and see also “Patents in Relation to Monopoly” (1946) 12 Can J Econ Pol Sci 328; Fox, “Patents in Relation to Monopoly: A Rejoinder” (1947) 13 Can J Econ Pol Sci 68-80. Fox argues that s 4 was intended to address unjustified threats of legal proceedings, similar in spirit to the UK Intellectual Property (Unjustified Threats) Act 2017, and which are normally dealt with in current Canadian law under s 7(a) of the Trademarks Act: see here and here. While Dr Fox’s theory was not considered by Schabas J, Fox’s conclusions are entirely consistent with his reasons. Fox agreed with the holding in Peck v Hindes, saying that it is authority for the proposition that “an action for infringement of a patent, whether valid or invalid, does not give rise to the action contemplated by sec. 4” (370, my emphasis); and similarly, on the authority of Peck v Hindes, "a person could not be penalized for bringing action in a court of law to support his letters patent even though he were unsuccessful” (369). Fox goes on to argue that “nevertheless he could be and would be penalized if he endeavoured to use his patent as a club held in terrorem over the heads of his competitors, and by so doing grieved, disturbed or disquieted those persons, by methods other than bringing the matter for hearing and determination before a court of law” (369). Whether Fox is right as to the intent and effect of s 4 is a question that we need not resolve here; it is enough to say that on Fox’s view, s 4 would clearly not allow recovery for damages in the circumstances of this case.
It is also worth noting that Fox explicitly agreed with Schabas J’s second general point: “No person can be penalized, other than by costs, for bringing an action to support what he considers to be a legal right” (372). This observation illustrates that s 4 is not in tension with the general principles set out by Schabas J; on the contrary, it can, and should, be interpreted harmoniously with that basic principle.
The next cause of action raised by Apotex is based on s 7(a) of the Trademarks Act, which is breached when one makes “a false or misleading statement tending to discredit the business, goods or services of a competitor.” Apotex argued that the false statement by Lilly lay in listing the 113 patent on the Patent Register, which entailed a representation that the '113 Patent was valid and enforceable [139]. Schabas J noted that “there is nothing untrue or false in any material respect, let alone disparaging or discrediting of Apotex, in the Form IV. At the time it was completed, Lilly did have the 113 Patent for Olanzapine. That is essentially all that was stated” [141].
Apotex’s final cause of action is common law conspiracy, which alleged a conspiracy to fix monopolistic prices. This was premised entirely on Lilly applying for a patent and listing on the register, which Lilly was perfectly entitled to do. There was no suggestion of improper conduct, other than obtaining a patent that was ultimately held to be invalid; this cannot constitute a conspiracy.
Finally, I note that Schabas J did not hold that use of the litigation process can never give rise to civil liability, but rather that any such liability must be based on a “stand alone cause of action” or a claim “totally independent of the regulatory regime”: [115], adopting the language of Apotex v Eli Lilly 2015 ONCA 305 [53] and 2013 ONSC 5937 [8]. Schabas J did not elaborate, as there was no allegation capable of supporting any independent ground, but in my view, groundless threats of infringement, that were the concern of authors such as Dr Fox and Prof Gugliuzza, would certainly fall into that category. There is therefore not the slightest conflict between Schabas J’s holding and the FC decisions, mentioned above, dealing with unjustified threats under s 7(a) of the Trademarks Act.
PS — Various similar actions are also before the courts at various stages of case management. In a case management decision in one such matter, Apotex Inc v Pfizer Ireland Pharmaceuticals 2021 ONSC 1860 Myers J adjourned a trial set for September in light of Schabas J’s decision in this case, and instead ordered that the matter be decided by way of a motion for summary judgement.
Apotex Inc v Janssen Inc 2021 FCA 45 Locke JA: Webb, Boivin JJA affg Janssen Inc v Apotex Inc 2019 FC 1355 Phelan J
2,661,422 / abiraterone acetate & prednisone / ZYTIGA / old NOC
The invention at issue in this case relates to the use of the combination of abiraterone acetate (AA) & prednisone for the treatment of prostate cancer. Today’s post will discuss the utility aspects of this decision, which touches on three different issues: (1) the nature of the utility requirement for a combination, (2) the requirement to disclose the factual basis for a sound prediction; and, (3) most importantly, the threshold for demonstrated utility namely that it is sufficient if the results are “strongly suggestive” of utility, and no other explanation is likely. (See Monday’s post on obviousness.)
Yesterday’s post sets out the facts in more detail; for this post it is enough to say that androgen produced in the adrenal gland promotes the growth of certain types of prostate cancer and AA was a known adrenal androgen inhibitor, albeit a relatively new one. Most adrenal androgen inhibitors also suppressed other adrenal hormones, such as glucocorticoids; this caused side effects which were treated by co-administration of a glucocorticoid, such as prednisone. AA had an unusual mechanism of action, and at the filing date it was thought that AA would not require co-administration of a glucocorticoid to reduce side-effects; instead, the inventors though that prednisone would have a synergistic effect with AA in treating the cancer itself. As it turns out, that theory was mostly wrong, but not entirely wrong: AA does cause side effects, and prednisone is co-administered for that reason, not for its synergistic effects in cancer treatment, but Phelan J did find that there is also a small synergistic effect.
Utility requirement for a combination
As discussed here, for a combination invention there is a question as to whether the utility requirement is satisfied if the combination has a scintilla of usefulness in treating the disease, or if there has to be a scintilla of a synergistic effect, such that the combination is at least marginally better than the sum of the individual effects. The combination at issue clearly had utility on the simple usefulness test ([218]–[219], but Phelan J proceeded on the view that a scintilla of synergy was required: see eg [219]-[221]. Phelan J found that there was a scintilla of utility even with a synergy requirement, though it was a much closer call.
Locke JA’s decision on appeal proceeded on the same assumption as Phelan J, ie that synergy was required, but without specifically affirming that this was the correct approach as a matter of law: see [43], [45]. My impression is that the point wasn’t argued at either the FC or FCA level; for example, the reference to the synergy requirement at [43] was literally parenthetical. I hope this means that the point shouldn’t be considered settled; but I recall how the promise doctrine started with a few statements that weren’t really challenged in complex litigation where there was a lot else going on, until by the time it was directly addressed, it was considered settled.
Enhanced Disclosure Requirement for Sound Prediction
The evidence relied on to establish utility was two trials, referred to as “Study 001" (AA and a different glucocosticoid, namely dexamethasone, in human subjects) and “Study 004” (AA and prednisone, also in human subjects), collectively the “Cougar trials.” The hypothesis that the combination of AA and a glucocosticoid such as prednisone would have a synergistic anti-cancer effect was referred to as “de Bono’s hypothesis” after one of the inventors [40]; this was the line of reasoning that would connect the trial data to the utility.
At first instance Phelan J held that Janssen could not rely on these trials or the de Bono hypothesis to establish a sound prediction of utility because “no part of de Bono’s hypothesis or the Cougar studies were disclosed in the 422 Patent and therefore Janssen cannot rely on sound prediction” [223]; and see [212]. Without the enhanced disclosure requirement, a sound prediction of utility would “likely” have been made out [223]. Thus this was a case in which the enhanced disclosure requirement played a real role. I had somehow missed this when blogging on Phelan J’s decision, so I’ll make a few comments on Phelan J’s decision at the end of this post. For now I’ll say that while there is certainly FCA caselaw directly endorsing the enhanced disclosure requirement, as Phelan J noted [223], in Sanofi-Aventis v Apotex / clopidogrel 2013 FCA 186 [132] Gauthier JA raised serious concerns about the doctrine. In this case, there was no challenge on appeal to Phelan J’s holding on sound prediction [38], but towards the end of the decision Locke JA quoted from my article “Must the Factual Basis for Sound Prediction be Disclosed in the Patent?” (2012) 28 CIPR 38, and remarked “For the purposes of the present appeal, it is not necessary to address the question posed in the title of Prof. Siebrasse’s article” [50]. Maybe it’s wishful thinking, but I’ll take this as a hint that there may be room to revisit this issue at the FCA level; the only other FCA decision to touch on the point after Gauthier JA’s comments in Clopidogrel, namely Eurocopter 2013 FCA 219 [153], waffled a bit by saying that disclosure in the specification “may” be required to support a sound prediction of utility.
Demonstrated Utility
While Janssen could not rely on the Cougar trials and the de Bono hypothesis to establish sound prediction, Phelan J held that the same data, in conjunction with previous studies on the anti-cancer effects of prednisone, was sufficient to demonstrate utility [FC 221].
The FCA affirmed. Locke JA’s reasons rested on three points of law or principle, combined with a deferential standard of review.
An initial point of law is that neither study was sufficient on its own to demonstrate utility, but Phelan J held that the combination did. Locke JA affirmed that “testing should be considered cumulatively when assessing demonstrated utility” [41], citing with approval Teva v Novartis / imatinib 2013 FC 141 [215]–[216].
Secondly, while the 004 Study tested AA in combination with prednisone [FC 43], the endpoint was not survival rate, but rather prostate specific antigen (PSA) response, which is “a surrogate measurement for the effectiveness of prostate cancer treatments” [FC 19]. The claims were to the combination “for the treatment of a prostate cancer in a human” [FC 38], and Apotex argued that a study using a surrogate could not demonstrate the claimed utility, but would merely provide the factual basis for a prediction of utility [47].
In response, Locke JA first noted that “the Federal Court found, as a fact, that PSA indicated the response to prostate cancer in 2007: Reasons, para. 19. This suggests that a reduced PSA level can be a demonstration of utility in fighting cancer” [48, original emphasis]. The general point, as I understand it, is that even when we consider a fact to be demonstrated, we don’t necessarily directly observe it directly. The Higgs boson is said to have been observed, but what was directly perceived is a peak in the output of a particular detector, which, combined with a suitable statistical analysis, allowed the CERN scientists to say, with a very high degree of confidence, that the existence of the Higgs boson has been established. If we say it has been shown that an antibody binds to an antigen, what is directly observed will likely be a colour change, which, combined with a theory about the conditions under which the colour will be observed, allows us to infer the binding. Even in an RCT in humans, the strongest way of demonstrating utility of a drug, we don’t directly observe the drug curing the disease; what is observed is the disease symptoms in the control and treatment groups, and this, combined with suitable statistical analysis, may allow us to infer that the drug treats the disease. There is no magic in “statistical significance” with a p-value of 0.05, as the replication crisis in social psychology shows; physicists require 5-sigma significance for important discoveries.
Thus Apotex’s objection is correct in a way; the use of the PSA really only allows us to predict—or more accurately, infer—that the combination is effective in treating prostate cancer. But the same would be true even if survival had been used as an endpoint; any conclusion that the combination worked to treat prostate cancer would be an inference based on a statistical analysis of the observed outcomes, which would allow for the role of chance, placebo effect and so on. Depending on the strength of the correlation between PSA levels and prostate cancer, it might well be that a high-powered study using PSA levels would give a greater degree of certainty than a low-powered study measuring survival rate. While the established doctrinal test for sound prediction requires a factual basis and a sound line of reasoning, the same is true for demonstrated utility, even though that point is not expressed as a formal test. There is no sharp difference in kind between a sound prediction of utility and a demonstration thereof; the difference is only the confidence with which we are prepared to draw the inference of causation. So, the fact that the 004 Study used PSA as a criterion rather than studying the survival rate itself does not mean that it cannot demonstrate utility, in the same way that the fact that CERN used statistical analysis of detector energy spectrum rather than direct visual perception does not mean that the Higgs boson has not been observed. The question as to whether utility has been demonstrated rather than soundly predicted does not turn on the nature of the tests that were carried out.
So, it makes sense in principle that the claimed utility need not be directly measured in order to be demonstrated. The question then is to decide how strong the inference must be in order to demonstrate utility, as opposed to merely predicting it. Locke JA held that utility need not be established with certainty in order to be demonstrated [49]:
It is sufficient that the test results are strongly suggestive of utility, and that there is no other logical explanation for the test results is likely.
Finally, Locke JA stated that “More broadly. . . it must be acknowledged that it is difficult to draw a clear line between a demonstration of utility and a prediction of utility” [50]. He went on to quote a passage from my article “Must the Factual Basis for Sound Prediction be Disclosed in the Patent?” (2012) 28:1 CIPR 38, in which I argued that there is no basis for distinguishing between the two. He then concluded that he would not intervene with Phelan J’s decision, “[b]earing in mind the vagueness of the line between prediction and demonstration,” combined with the evidence relied on by Phelan J, and in light of the applicable (deferential) standard of review [51].
Locke JA did not explain exactly why the vagueness of the distinction between demonstration and sound prediction was relevant in upholding Phelan J’s finding that utility had been demonstrated. I made the point in my article to argue that because there is no sharp distinction in reality, there should be no sharp distinction in doctrine; either disclosure of the factual basis should be required for both demonstrated utility and sound prediction, or for neither. That is evidently not how Locke JA is invoking the argument, given that his decision proceeded on the assumption that there is an enhanced disclosure requirement for sound prediction and not for demonstrated utility. I think that what Locke JA was saying is that given that current doctrine establishes a line that is vague, as Locke JA put it—or not grounded in reality, as I might prefer to say—the law should not be too alert to enforce that boundary strictly, so as to avoid arbitrary results. Put another way, the threshold for demonstrated utility should be applied flexibly, given the drastic legal consequences of a vague and arguably arbitrary distinction. This is consistent with GSK/rosiglitazone 2011 FC 239 [98], for example, in which the utility of a claim to the compound rosiglitazone was held to be demonstrated on the basis of potential use for treatment of hypoglycaemia.
While this all makes sense, it does illustrate that the law faces a struggle in adapting to the enhanced disclosure requirement. Ultimately, the FCA will have to deal with the issue head-on. When that time comes, this decision will be an important part of the context.
Phelan J’s discussion of the enhanced disclosure requirement
As noted above, Phelan J proceeded on the view that there is an enhanced disclosure requirement, applicable to sound prediction but not demonstrated utility, such that the factual basis and line of reasoning to support a sound prediction must be disclosed, or at least referenced, in the patent itself. There is certainly FCA caselaw expressly so holding: see Lilly v Apotex / raloxifene 2009 FCA 97 [15]; Lilly v Teva / atomoxetine 2011 FCA 220 [46]–[47]. Subsequently, however, in Sanofi-Aventis v Apotex / clopidogrel 2013 FCA 186 [132] Gauthier JA raised serious concerns on this point in her concurring reasons, though that of course does not in itself overrule the prior FCA holdings; at most, it suggests that there might be some appetite to reconsider the issue in the future. So Phelan J was on firm ground in taking this position. With that said, I have a couple of concerns about his analysis. He didn’t refer specifically to either the Raloxifene or Atomoxetine decisions, but they were evidently the premise of his analysis. His discussion of the relevant case law was as follows:
[222] The Supreme Court of Canada stated in Apotex Inc v Wellcome Foundation Ltd, 2002 SCC 77 at para 70, [2002] 4 SCR 153, that sound prediction requires a factual basis, line of reasoning, and disclosure of the prediction in the patent.
In my view, it is not correct to say that the SCC in Wellcome / AZT held that disclosure of the factual basis is required in the patent. The passage was cryptic and was expressly obiter. That doctrine is really the product of the FC / FCA interpretation of that passage, particularly in Raloxifene. I also have to point out that while the SCC said in Wellcome / AZT that “both the underlying facts (the test data) and the line of reasoning (the chain terminator effect) were in fact disclosed,” that statement is incorrect.
Phelan J went on to say:
Although some commentary has suggested the Supreme Court of Canada may have overturned this statement, the Federal Court of Appeal in Bell Helicopter Textron Canada Limitée v Eurocopter, société par actions simplifiée, 2013 FCA 219 at paras 152-155, 120 CPR (4th) 394, confirmed that where the factual basis and line of reasoning are based on data that is not part of the common general knowledge, then disclosure is likely required to support sound prediction.
I believe the first sentence refers to some commentary suggesting the SCC in AstraZeneca 2017 SCC 36 overturned the enhanced disclosure requirement. I recall seeing that commentary, but I can’t find it or a case referring to it (if any reader can point me to it in a comment, I’d appreciate it.) In any event, I agree with Phelan J that the AstraZeneca decision does not affect the issue one way or the other.
My own view isn’t that the SCC overruled itself in AstraZeneca, it’s that Wellcome / AZT never established an enhanced disclosure requirement in the first place. The SCC’s statements in Teva 2012 SCC 60 are more to the point. The SCC stated at [37] that
The lack of certainty that comes from predicting rather than demonstrating an invention’s utility has led some courts to conclude that there is a “heightened” or “enhanced” disclosure requirement in cases in which a claim of utility is based on sound prediction: see, e.g., Eli Lilly Canada Inc. v. Apotex Inc., 2009 FCA 97, 78 C.P.R. (4th) 388, at paras. 14-15.
Notably, the SCC did not cite its own decision in Wellcome / AZT as suggesting an enhanced disclosure requirement. The SCC in Teva concluded its discussion of this point by saying “Since sound prediction is not an issue, the question whether there is an ‘enhanced’ or ‘heightened’ disclosure requirement with respect to sound predictions does not arise in this case and need not be addressed” [43]. The SCC did not say “We need not consider whether we should overrule our holding in Wellcome / AZT.” In my view, it is clear that the SCC does not consider that it established an enhanced disclosure requirement in Wellcome / AZT; I am quite certain that if the matter ever did go to the SCC, the Court would not consider that the question was whether it should overrule its own precedent, but rather whether it should overturn a rule established by the Federal Courts.
