Nova v Dow: The Intuition

Nova Chemicals Corp v Dow Chemical Co 2022 SCC 43 Rowe J: Wagner CJ, Moldaver, Karakatsanis, Brown, Martin, Kasirer and Jamal JJ concurring; Côté J dissenting affg Nova Chemicals Corporation v Dow Chemical Company 2020 FCA 141 Stratas JA: Near, Woods JJA affg Dow Chemical Co v Nova Chemicals Corp 2017 FC 350, 2017 FC 637 Fothergill J

2,160,705 / film-grade polymers / ELITE SURPASS

That has been a much longer blogging break than I’d anticipated back in December. As well as teaching a new course, I have been working on a case comment on Nova v Dow 2022 SCC 43, which has turned out to be very long. I will not try to summarize the argument in one post. Instead, I’ll post summaries of consecutive sections of the comment every Friday for a few weeks.

An accounting of profits is an equitable remedy which, in patent law, requires the infringer to disgorge profits made by the infringer through its use of the patented invention; this is in contrast with damages, which looks to the loss suffered by the patentee as a result of the infringement. In Nova v Dow the Supreme Court addressed the proper method of calculating an accounting of profits in the patent context.

In this post, I will describe what I take to be the intuition underlying the decision of both Rowe J’s decision for the eight-person majority, as well as Côté J's dissent. I am confident that I understand Côté J’s position, since I share it. But there is clearly a strong contrary intuition, which attracted eight members of the SCC as well as Stratas and Near JJA in the FCA, that I have had more difficulty grasping. That makes it all the more important to “steelman” Rowe J’s argument. With respect, Rowe J’s decision is not well reasoned at a technical level, but a strong intuition poorly expressed is a strong intuition nonetheless. To simply go through and point out shortcomings in the doctrine and policy would not persuade anyone who shared that intuition. So, I will first try to identify the best form of underlying intuition. I will then argue that the intuition is wrong, even in its best form, and the doctrinal shortcomings of the decision are not merely technical attacks, but rather reflect the defects of the underlying intuition.

Even the first step is an uncertain enterprise, as Rowe J never clearly articulated his driving intuition. While I disagreed strongly with the decision of Stratas JA, it was, in my view, a much stronger decision, which identified and addressed the key points more directly: the best discussion of what I believe to be the key intuition was in Stratas JA’s decision at [77]–[78]. But we can’t assume that Rowe J necessarily agreed with Stratas JA; while he affirmed the holding, Rowe J did not expressly approve Stratas JA’s reasoning. I think that I have identified the key intuition, but I’m not sure. I’d be very interested in any comments as to whether I have managed to identify the main intuition.

The essential facts are that Dow had a patent on specialized plastic film, used for items such as food packaging. Nova made and sold a competing film that was found to be infringing. Dow was awarded an accounting of Nova’s profits from sales of infringing film, with a quantum of $644 million. The major input to the infringing plastic is ethylene, an unpatented bulk commodity. Nova had a very efficient process for making ethylene—the “Alberta Advantage”—and so could make ethylene for far less than it would have cost to buy on the open market. On the facts, if Nova had not infringed, it would have used its ethylene to make bulk “pail and crate” plastic [FC 158]. Nova argued that because of the Alberta Advantage, it would have made approximately $300 million in profit on the sale of that plastic, despite the competitive nature of that market [FCA 187]. The question was whether Nova was entitled to deduct the amount it would have made in the pail and crate market, on the view that that part of the overall profit was caused by its efficient ethylene production process, and not by the infringement.

The background lies in what was traditionally known as the problem of apportionment. In some cases, as where a patent claims the active pharmaceutical ingredient of a drug, the patented technology contributes essentially all the value, and it seems evident that the value of the invention is its price less its cost. (Even here there are some refinements regarding cost of capital and fixed costs, which we can ignore for now.) But for many products it is clear that the patented technology contributes only a part of the value. When the product is a motor oil with a patented additive, a smartphone with a patented “bounce-back” feature, an iPad with patented 3G capability, or canola with a patented herbicide resistance gene, it is clear that the entire value of the product is not due to the patented technology alone.

In such cases, some part of the profit on the product as a whole must be “apportioned” to the patented invention. But how? One appealing answer is to compare the patented product with the non-infringing alternative. If the profit on motor oil with the additive is $1, and profit on motor oil without the additive is 95 cents, it seems clear enough that the profit attributable to the patented additive is 5 cents. If the iPad sells for $700 with 3G technology and $600 without it, the value of the patented 3G technology is $100. A similar logic applies to process patents: if a product sells for a dollar and the patented process reduces the cost of manufacture from eighty-five cents to eighty cents, it seems clear that only 5 cents of the twenty-cent profit is attributable to the patented process.

These examples suggest that the value of the invention is the difference between the profit on the infringing product, and the profit on the non-infringing alternative: the oil without the patented additive, or the end-product made by the unpatented process. How can we generalize this insight? What is the underlying principle? This was the key question facing the Supreme Court in Nova v Dow.

One view, taken by Côté J, Nova, and the interveners, is that the appropriate non-infringing option reflects the application of “but for” causation. Patent infringement is generally considered to be a species of tort, and damages in tort law are assessed as the difference between the plaintiff’s actual position, after the tort, and the position the plaintiff would have been in but for the tort: Athey v Leonati [1996] 3 SCR 458 [32]. Applying “but for” causation to an accounting of profits therefore means that the infringer is to be put in the position it would have been in had it not infringed, and the amount to be disgorged is the difference between the infringer’s actual position and the position the infringer would have been in but for the infringement. (For convenience, we may refer to this as a “but for” accounting.)

On this view, any similarities between the infringing acts and the “but for” world in which the infringer did not infringe are irrelevant in principle; what is fundamental is what the infringer would in fact have done but for the infringement. This is not to say that it is pure coincidence that the alternatives in the above examples are very similar to the infringing product. It is not very surprising that a motor oil manufacturer might choose to sell oil without an additive if it could not sell it with that additive; or that a canola farmer would plant conventional canola if they could not plant herbicide resistant canola; it is not surprising if a generic pharmaceutical company would use an unpatented process instead of a patented process to satisfy the market for a drug. So, if there is a very close market substitute, it is not uncommon that what the infringer would often have done had it not infringed would be to make and sell that substitute. But this is merely an empirical regularity, and not a fundamental principle; if, on the facts, the infringer’s acts in the “but for” world would have been very different from the infringing acts in the actual world, this is no cause for concern, and the analysis proceeds in exactly the same way. If the infringer would have withdrawn entirely from the market, then the entire profits are caused by the infringement (subject to refinements regarding fixed costs and capital costs); if the infringer would have made a substitute profitable product, that profit is deducted from the actual profit; if the infringer would have made an unrelated, but profitable product, that profit is deducted from the actual profit. On the “but for” causation, if Nova could establish that it would in fact have made $300m in the pail and crate market as a result of the Alberta Advantage, it should be allowed to deduct that amount from its actual profits, to arrive at the quantum to be disgorged.

The other view, taken by Rowe J for the majority, is that there is something special about certain non-infringing options such that a comparison with the non-infringing option reveals the value of the invention. While the argument is difficult to summarize, I believe the underlying intuition is that the infringer must disgorge profits reflecting the value of invention, and the value of the invention cannot depend on what happens in entirely unrelated markets. That requires rejecting “but for” causation.

To see why, suppose a firm called Mova sold infringing plastic in competition with Dow. In the actual (hypothetical) world, it made $900m in revenue from infringing sales, with $300m in costs, for a profit of $600m. It could have made a non-infringing plastic that was a perfect market substitute, so that it could have made exactly the same $900m in sales without infringing, but the non-infringing plastic costs $100m more to make because of higher energy costs. With the same revenue and $400m in costs, the profit from the non-infringing substitute would have been only $500m. That is less than $600m, but still a healthy profit. The value of the patented invention is that it allows a high-quality plastic to be made at a lower cost. A comparison between the profit on the infringing product and the profit on the non-infringing substitute reveals that value, which, in this example, is $100m. As we will see below, that is the amount to be disgorged on Rowe J’s approach.

Now consider how the “but for” causation plays out. Suppose that Mova could also have made non-infringing commodity grade plastic in the same plant, and if it had done so it would have made $450m in profit. While the plant was capable of making either non-infringing market substitute or commodity grade plastic, the former would have been more profitable than the commodity grade plastic, and, it is established that had Mova not infringed, it would have made and sold the market substitute plastic. The result, on a “but for” accounting, is that Mova would be required to disgorge the same amount as under Rowe J’s approach, namely $100m. To this point, the “but for” causation and Rowe J’s approach give the same result.

Now twist the hypothetical slightly and suppose that during the period that Mova was infringing, Crocs came back into fashion, and the market for commodity grade plastic tightened. With Crocs having taken the world by storm, Mova would have made $550m in the market for commodity grade plastic. That is still less than the profit on the infringing plastic, but more than the profit on commodity grade plastic, so in the “but for” world, Mova would have sold commodity plastic. On a “but for” accounting, the amount to be disgorged would be only $50m.

The result of applying “but for” causation to this hypothetical scenario seems very counter-intuitive. What actually happened is that Mova made and sold infringing food grade plastic. The value of the invention is $100m in saved costs. But because of some quirky fashion trend, probably started by an Instagram influencer, which caused fluctuations in a totally different market, Mova only has to disgorge $50m instead of $100m. But how can the vagaries of the fashion market possibly affect the value of an invention used for making food wrap? Surely the value of the invention is the same, regardless of whether Crocs are in fashion. To take a more extreme example, what if Mova could show that it could have made a profit in a tight market for Chinese tea? Should that profit be deducted? The principle is no different than the pail and crate example, but surely the price of tea in China has nothing to do with the profit attributable to Mova’s infringement of a patent on plastic food wrap. As we will see, Rowe J’s approach avoids these paradoxes. On his approach, the profit to be disgorged is $100m. This is the difference between the actual profit of $600m and the profit on the non-infringing market substitute which reveals the true value of the invention. Fashion trends in footware and the price of tea in China, play no role.

That, I believe, is the basic intuition behind Rowe J’s approach.

It is one thing to have an attractive intuition, it is another to turn an intuition into a generalizable principle. Subsequent posts, will show that Rowe J fails to provide any coherent methodology for identifying the non-infringing option that reveals the true value of the invention. This is because an invention does not have any inherent true value; and it turns out that the apparent paradoxes I have just outlined are not paradoxes after all.

Blogging Break Continues

My blogging break is turning out to be longer than anticipated. I have been unexpectedly tasked with teaching a course that I have never taught before, in an area – professional conduct – that is unrelated to any of my research interests, and I have had to focus on getting up to speed. I am also working on an in-depth analysis of Nova v Dow 2022 SCC 43. Between these two projects I have not had time to return to my regular blogging. I expect to return to my usual blogging schedule in a couple of weeks, starting with the cases that I have missed in the meantime.

Short Blogging Break

I’ve fallen behind in my blogging as I’ve been struggling to understand the shocking majority decision in Nova v Dow 2022 SCC 43 — and now exam time is upon me. I’ll try to post something short on Nova v Dow next week, with a longer piece to follow. Then I’ll follow up with posts on some of the other decisions I have missed.

Validity of Non-asserted Claims May Be Attacked in NOC Action

Janssen Inc v Apotex Inc 2022 FCA 184 Locke JA: Mactavish, Monaghan JJA affg Janssen Inc v Apotex Inc 2021 FC 7 Phelan J

2,661,422 / abiraterone acetate & prednisone / ZYTIGA / NOC / FC Expectation of Success

In this decision, the FCA affirmed Phelan J’s holding (see here) that Janssen’s 422 patent, relating to the combination of abiraterone acetate (AA) and prednisone (PN) for the treatment of prostate cancer, was invalid for obviousness. Phelan J also held that the 422 patent was not invalid for lack of utility, and that it would have been infringed by inducement if it had been valid, but the only issue addressed on appeal was obviousness [8]. The main point of legal interest is the holding that the Federal Court has jurisdiction in a PM(NOC) proceeding to hear a counterclaim attacking the validity of claims that are not asserted in the action, at least on agreement by the parties.

Phelan J’s obviousness analysis turned on the facts, and the FCA affirmed on the same basis: see [31]–[32] finding there was a sufficient factual basis for the key obviousness finding. There were two “palpable” errors in the decision [24], [35], but reading the decision as a whole, Locke JA considered that the errors did not reflect any error in Phelan J’s appreciation of the evidence; both were merely a “slip of the pen” [26], [35]. In another slip of the pen in both the decision [FC 261] and the Judgment itself [56], Phelan J had erroneously dismissed the counterclaim, even though he had found the claims to be invalid. Locke JA accordingly ordered that the Judgment be amended to grant the counterclaim, reflecting the Judgment that Phelan J should have made [58].

Janssen had argued that Phelan J had erred in treating a particular statement in the 422 patent as a binding admission [19], but Locke JA found that Phelan J had not in fact treated the statement as a binding admission, and therefore it was unnecessary to address the circumstances under which an admission in a patent will be binding on the patentee [22].

On the procedural point, Phelan J had also made orders allowing a late addendum to an expert report addressing claims that were not asserted by Janssen, and also allowed an amendment to the counterclaim challenging the validity of the non-asserted claims. In a separate appeal, Janssen v Apotex 2022 FCA 185 (not blogged) the FCA affirmed these orders. While Phelan J’s decision is not entirely clear, it seems that he held the non-asserted claims to also be invalid, as being “essentially the same” [FC 118] as the asserted claims. While Phelan J’s Judgment is not appended to his reasons that are available online, he apparently consequently ordered the 422 patent to be removed from the Patent Register [1], [56].

Janssen challenged this on the basis that the Federal Court does not have jurisdiction under s 6(3)(a) of the PM(NOC) Regs to address non-asserted claims [40]. Locke JA concluded that Phelan J had assumed jurisdiction to address the non-asserted claims on the basis that Janssen had consented to counterclaim [44]. Locke JA therefore addressed the question of “whether such a counterclaim is permitted with leave. As did the Federal Court, I will leave for another day, the question of whether a defendant in an action under subsection 6(1) may make such a counterclaim by right” [46, original emphasis]. Locke JA noted that there were reasonable arguments to be made on either side of the question [49], but after a review of the text, context (including the RIAS) and purpose of the legislation, Locke JA concluded that “In my view, the intention of the Regulations is to leave to the Federal Court the discretion to permit a counterclaim under subsection 6(3) that includes non-asserted claims” [54]. I note that Phelan J apparently based his decision to consider the counterclaim on the “consent” of Janssen [FC 232], [FC 235], but the FCA has held that a counterclaim including non-asserted claims is permitted at the discretion of the Federal Court. Janssen’s consent is evidently not required, but is simply one factor that the Federal Court may consider in the exercise of its discretion.

Norwich Order Not to Be Used to Circumvent Discovery

Worthware Systems International Inc v Raysoft Inc 2022 FC 1492 Pentney J

2,515,486 / Internet Based Cellular Telephone Service Accounting Method and System

In this decision Pentney J refused to grant a Norwich Order in the patent context. No new law was involved, but the decision is helpful nonetheless as we don’t see many decisions on Norwich orders in the patent context.

The 486 patent relates to a method of inputting customer information at the point of sale of cellphones [7]. Worthware and Raysoft both provide point of sale software to dealers, and Worthware brought an infringement action against Raysoft alleging that Raysoft’s product infringed. In this motion, Worthware sought a Norwich order against Raysoft’s controlling mind—the sole director, President and Secretary, and only shareholder—Mr Lalancette, ordering him to provide information regarding Raysoft’s clients. Worthware argued that it was entitled to know the identity of the clients, who would be direct infringers, both to be able to calculate its damages, and in order to bring proceedings against the dealers in the event that Raysoft would be unable to satisfy a damages award. Raysoft, on the other hand, argued that the parties operate in a small and highly competitive market, and that Worthware was seeking the names and addresses of Raysoft’s dealers in order to try to sell them its software [20].

Pentney J refused to grant the order, primarily on the basis that Worthware had not established that Mr Lalancette is the only practical source of the information it seeks [21]. He emphasized that a Norwich Order is “extraordinary equitable relief” which is “an intrusive and extraordinary remedy that must be exercised with caution,” [22], citing GEA v Ventra 2009 ONCA 619 [85]. The requirement that the party seeking the order must show that it is necessary because the party named is the only practical source of the information is therefore an “ironclad” element of the test. In this case, the defendant Raysoft itself also holds the necessary information, as was acknowledged by Worthware [24]–[25].

Moreover, Worthware had asked for the very information it now seeks during the examination for discovery of Mr. Lalancette, who testified as the Defendant Company’s sole representative. Raysoft objected, and the CMJ refused to order production of Raysoft’s client list, because “the discovery process does not serve to obtain names of potential witnesses for the sole purpose of starting an action against them… The jurisprudence has clearly and consistently discouraged such fishing expeditions…” [26]. This confirmed that Mr. Lalancette is not, in fact, the only practical source of the information [29].

More broadly, Pentney J pointed out that “a Norwich Order is not intended to be used to circumvent the normal discovery process in litigation” [34]. If Worthware was unsatisfied with the refusal of the order for disclosure of the client list, it should have appealed that decision, rather than trying an end run by way of a Norwich Order.

Another factor is that Worthware brought its motion for a Norwich Order almost four years after bringing its action against Raysoft, even though it knew all the key facts about how the alleged infringement operated; this called into question Worthware’s motivation in deciding to seek extraordinary equitable relief [31]. Pentney J dismissed Worthware’s argument about its doubts as to whether Raysoft would be able to satisfy any damages award as being unsupported by the evidence, and undermined by Worthware’s failure to take any other steps to protect its position, such as asking for security for costs [32].

IPIC Subject Matter Test Properly Subject to Appeal

Canada (Attorney General) v Benjamin Moore & Co 2022 FCA 194 Rennie JA

2,695,130 / 2,695,146 (applications)

This decision relates to a procedural wrinkle in the Benjamin Moore litigation, which is set to clarify the law relating to patentable subject matter. The Commissioner had refused two of Benjamin Moore’s applications on the basis that the claims were directed to non-statutory subject matter. Benjamin Moore appealed, and in Benjamin Moore 2022 FC 923, Gagné ACJ endorsed a particular test, proposed by the intervener, IPIC, for assessing patentable subject matter (see here). She then sent the applications back to CIPO for redetermination. The Attorney General had agreed that CIPO had used the wrong test, and that the files should be sent back for redetermination, but would have preferred that CIPO be instructed to decide the matter according to the principles set out in Choueifaty 2020 FC 837: [FC 39]. Significantly, Gagné ACJ instructed CIPO to use the IPIC test in paragraph 3 of the judgment itself.

The Attorney General then appealed. Benjamin Moore brought this motion to strike, arguing that the AG had no disagreement with the result—the files should be sent back for redetermination—and the appeal was brought to challenge the IPIC test. It is clear that the FCA, under the Federal Courts Act, s 27, only has jurisdiction to hear an appeal against the judgment, and Benjamin Moore argued that the appeal was in substance an appeal against the reasons.

The key question in this motion was therefore whether the appeal truly relates to the Federal Court’s judgment, or to its reasons for that judgment: [14]. Rennie JA noted that whether an appeal is taken from the reasons or the judgment is not always self-evident. The central policy consideration is “whether the appeal is a veiled attempt to keep the benefit of the judgment but realign the reasons for judgment. Sometimes a party will be successful in the result, but will not like the manner by which they succeeded. Courts must always be vigilant to guard against appeals brought on this basis” [25].

Rennie JA held that in this case, the appeal was an appeal against the judgment, not just the reasons, and so the motion was quashed. He discussed two prior FCA decisions, in Yansane 2017 FCA 48 and Fournier 2019 FCA 265 affg 2018 FC 464. In Yansane, the FCA had noted at [17] that “the Court often simply directs that reconsideration take place in accordance with its reasons,” and held that in such a case an appeal against the reasons was not permitted, as “only instructions explicitly stated in the judgment bind the subsequent decision-maker” [19]. In Fournier, the FC judgment stated that “The case is referred back to the Appeal Panel for reconsideration, taking into account these reasons.” The appellant asked the court to uphold the judgment, in the sense of referring the matter back to the Appeal Panel, but asked the FCA to declare that the FC had erred in its interpretation of a point of law. The FCA held that this was an impermissible attempt to appeal the reasons, and the reference to the “taking into account these reasons” did not change the essence of the appeal:

[31] I am therefore of the view that the addition of that statement in the formal judgment is not sufficient to incorporate therein the reasons in their entirety, much less to make of that statement a strict direction or even a directed verdict. If it were otherwise, reasons would always open up the possibility of an appeal.

He distinguished these decisions on the basis that they related to situations which there was a general reference to the reasons in the formal judgment [19],[20], whereas in this case “paragraph 3 of the judgment lays out a test for the Commissioner that can be uniquely enforced, separately from the accompanying reasons” [22], and

paragraph 3 of the Federal Court’s judgment is a specific direction in this respect, akin to a declaratory judgment. Consistent with [the prior cases], the specific direction in paragraph 3 forms part of the judgment and uniquely binds the Commissioner to a particular test in a way that the reasons alone do not [26].

This does distinguish the prior cases, though at first blush it might seem a bit formalistic. One response to that is simply to say that a line has to be drawn somewhere and any test that provides any degree of certainty has to be formalistic to some degree. Another response is that the distinction is by no means purely formal. Rennie JA noted that “This test responds to the only substantive consideration that was before the Federal Court, laying at the core of the Federal Court’s formal judgment in the matter” [26]. The formal point and the substantive point go hand in hand: when the particular legal test is found in the judgment itself, this is a very good indication that the court considered it to lie at the core of the decision. For both those reasons, I do find the distinction drawn by Rennie JA to be persuasive.

With all that said, it’s not entirely clear to me why the court has to be so vigilant to guard against a party seeking to “keep the benefit of the judgment but realign the reasons for judgment.” Victory on the facts in a case is always welcome, but for parties who are repeat players in the litigation system, as is true for many patent litigants, the shape of the law may be much more important in the long run. If the decision goes against a party, they have a full opportunity to reargue the law on appeal, and it’s not entirely clear to me why they should be denied that opportunity if the ruling goes in their favour, simply because the trial judge did not find the legal point important enough to put in the judgment itself. I’m sure there’s an answer to that question in the voluminous jurisprudence on the US “case or controversy” requirement, but I won’t pursue it, since the point is academic in this context, given that Rennie JA did allow the appeal to proceed.

 

Routine Correction of Inventorship

Genentech, Inc v Canada (Commissioner of Patents) 2022 FC 1447 Manson J

            2,979,671

This was a routine correction of inventorship under s 52. The application was supported by affidavits and it was established that the mistake arose through inadvertence. Manson J provided a useful summary of the relevant law at [11]–[14].

A (Kind Of) Successful Overbreadth Attack

Rovi Guides, Inc v BCE Inc 2022 FC 1388 Lafrenière J

2,336,870 / 2,339,629 / 2,425,482 / 2,514,585 / Interactive Television Program Guide / Internet Protocol Television

As discussed in my last post, in this decision Lafrenière J held that all of the asserted claims of Rovi’s patents were invalid for anticipation and / or obviousness. The last post focused on remedial issues. This post discusses overbreadth.

As Lafrenière J put it, “A claim is overly broad and invalid if it asserts ‘exclusive property or privilege in something the inventor did not actually invent’” [298]. In my articles on Overbreadth in Canadian Patent Law (2020) 33 IPJ 21 and (2021) 33 IPJ 147, I showed that overbreadth is functionally redundant in almost all cases in which it is invoked; that is, in almost all cases, the factual basis and reasoning leading to a finding of invalidity for overbreadth is exactly the same factual basis and reasoning leading to a finding of invalidity on some other standard ground, such as anticipation: see eg BVD v Canadian Celanese [1937] SCR 221. (The historical exception is Amfac (1986) 12 CPR(3d) 193 (FCA), which I argued was wrongly decided.)

Now, even though overbreadth is functionally redundant in almost all cases, that does not mean it is necessarily functionally redundant all cases; so, in my article I gave the example of the ‘roads to Brighton’ problem in which overbreadth might in principle play an independent role. In Seedlings 2021 FCA 154 [50] the FCA held that “overbreadth remains a proper ground of invalidity,” but at the same time Locke JA acknowledged that “the overlap with other grounds of invalidity makes it difficult to define circumstances in which a patent claim would be invalid for overbreadth but not also invalid on other grounds” [52]. Since Seedlings, parties attacking a patent have attempted to give some independent force to an overbreadth attack, so far without success.

In this case the defendants made overbreadth attacks on two patents, one of which failed and one of which succeeded, albeit in obiter.

The overbreadth attack on the 870 patent was novel. The factual basis for the Defendants’ attack was that the 870 patent claims priority from US provisional application 60/092,807 (the ‘807 Application’). One of the inventors of the 870 patent admitted that “the invention he made in July 1998 was limited to that which he described in the 807 Application” [300]. It was undisputed that the matter disclosed in the 807 Application has very limited overlap with the 870 patent: [301]–[302]. What the inventors claimed in the 870 Patent was therefore significantly broader than the 807 Application, and the Defendants argued that the 870 Claims are invalid on that basis [303].

Lafrenière J rejected this; he agreed with Rovi that “the ‘invention made’ is to be determined as of the filing date, not the priority date” [304]. This must be right, or overbreadth would swallow the claim date rules. The claim date is the filing date unless priority is claimed to a prior application “disclosing the subject-matter defined by the claim”: s 28.1(1)(a)(i),(ii). If the subject-matter disclosed by the application as filed is broader than that in the priority document, the only consequence is that priority cannot be claimed. And that is on a claim by claim basis, as the term “claim date” indicates. Claims that are directed to subject-matter that was disclosed in the priority document can still claim priority. To invalidate the entire patent would upend that well-established system.

The overbreadth attack on the 482 patent was different in nature. The 482 patent relates to a system and method for automatic retrieval of on-demand media data so as to avoid interruption to prevent unacceptable delays in the display of the video-on-demand listings during periods of higher traffic or low bandwidth connections. Lafrenière J rejected a construction which would have included “manual only” retrieval of on-demand data, but nonetheless considered and accepted the Defendants’ argument that if the 482 claims covered manual retrieval, they would be overbroad: [556]–[563].

On the claim construction point, as I understand it, Rovi wanted to argue that the claims included user-initiated download of on-demand data, presumably to bolster their infringement argument: see [562]. The claim at issue expressly requires “automatically retrieving” the on-demand data [473]–[474], and Rovi’s expert had admitted that user initiated retrieval was not automatic retrieval [500]. So, the argument that the patent covered manual retrieval was a complete dud. This makes it a bit difficult to grasp the overbreadth argument, since the premise that the claim encompasses manual retrieval is without foundation.

Lafrenière J’s discussion was understandably brief, given his holding on claim construction. Much of his discussion reviewed the evidence to the effect that the patent was entirely addressed to technology using automatic retrieval, which is of course consistent with Lafrenière J’s finding on claim construction. Manual retrieval simply was not addressed.

With this background, the key discussion was that

[561] I agree with [the Defendants’ expert] that the Skilled Person would understand that the invention described in the 482 Patent requires “automatically retrieving” at least some of the on-demand media data without a user indication to access it because “manual only retrieving” the on-demand media data causes the very undesirable consequences that the 482 Patent seeks to avoid.

[563] Dr. Robinson’s uncontested evidence is that there is no disclosure in the 482 Patent about manually retrieving on-demand media data. Therefore, to the extent such a claim is made in the 482 Patent, the claim is broader than any invention disclosed.

So, the gist of it seems to be that the 482 patent made no mention of manual downloading, so if it had claimed manual downloading, it would have been overbroad, in much the same way as the 482 patent would have been overbroad had it claimed a compound that cures cancer on the basis of a description focusing entirely on interactive television guide technology.

More broadly, a claim is overbroad if it claims subject-matter that is entirely unrelated to the disclosure. That seems reasonable enough, but the question is whether this raises overbreadth as an independent ground of invalidity. I suspect that in the vast majority of cases, a patent that claims subject-matter unrelated to the disclosure would be invalid for insufficiency. Put another way, is it possible for a patent to have claim to subject-matter that is entirely unrelated to the disclosure, in which the claim is nonetheless not invalid on any traditional ground? What if the 482 patent in this case had omitted the word “automatically” in the claim, and it was held that the claim, properly construed, encompassed manual retrieval. Suppose also that automatic retrieval was technically difficult, and the disclosure exclusively addressed automatic disclosure without mentioning manual retrieval; but at the same time, manual retrieval was not technically difficult and could easily be implemented by a skilled person in light of their common general knowledge. Would that patent be invalid simply on the basis the description did not mention manual downloading ie even if manual downloading was novel and non-obvious? I’m not sure.

My sense is that the success of the overbreadth argument in this case turned on the fact that it was premised on a claim construction that had no foundation in the patent. This makes it difficult to draw broader lessons from the analysis. It’s not very surprising that if we give a claim a construction that has no basis in the patent, the claim will be invalid in light of that patent. I doubt that observation is going to generate any independent role for overbreadth in the context of a properly construed claim.

Accounting and Injunction Denied Due to Patent Holdup

Rovi Guides, Inc v BCE Inc 2022 FC 1388 Lafrenière J

2,336,870 / 2,339,629 / 2,425,482 / 2,514,585 / Interactive Television Program Guide / Internet Protocol Television

In this decision Lafrenière J held that all of the asserted claims of Rovi’s patents were invalid for anticipation and / or obviousness in an analysis that turned entirely on the facts. Infringement was largely conceded [142]. The most import aspect of the decision was Lafrenière J’s discussion of remedies, though it was strictly obiter given his holding on validity [578]. Lafrenière J held that even if the patents had been valid and infringed, he would have denied both an accounting of profits and injunctive relief, expressly on the basis that “the present case exemplifies the patent holdup problem” [652]. In my view, Lafrenière J was right in both his analysis and his conclusions.

The trial in this case took place shortly after completion of the trial of the infringement action brought earlier by Rovi against Videotron, also before Lafrenière J, resulting in Rovi v Videotron 2022 FC 874* [36]. Rovi v Videotron involved two of the same patents, namely the 629 and 870 patents, as well as two additional patents, 2,337,061 and 2,730,344. (I’ve counted a total of 12 different Rovi patents that have popped up in various motions and other litigation, and no doubt this is only a selection from a large portfolio.) As discussed here, the result in Rovi v Videotron was much the same as in this case: Lafrenière J held all of Rovi’s asserted claims to be invalid, and he would have denied an accounting. Lafrenière J’s remedial analysis was also very similar in Videotron, though this decision is somewhat more explicit in discussing the holdup problem.

It is fortunate for the development of the law that this was a particularly clear case of holdup on the facts; it sets out the principle that an accounting and injunctive relief can be denied to address holdup, while leaving it to future cases to address more difficult borderline cases. I can’t say that the principle is now established, given that the remedial holdings in BCE and Videotron were obiter decisions at the trial level. But I hope they will be influential nonetheless, as Lafrenière J’s decisions strike me as a sound basis for further development of the law of patent remedies in the context of patent holdup and patent assertion entities.

A couple of preliminary points. This post is much too long, but to paraphrase Pascal, I didn’t have time to write a shorter one. I am going to blame Covid brain fog for the length and delay. Second, this is a very long decision, dealing with multiple patents and issues, and it would be very helpful if Lafrenière had asked his clerk to create a hyperlinked table of contents to go at the start of the decision. The decision is well-structured with headers (like most FC decisions), so all that would be required is to generate the ToC. I’ve seen this done in a number of decisions, and I’d like to see it become routine, at least for long decisions.

Posting to Resume Soon

I thought I'd post an update since it's been an unusually long time since I last posted. I'm not giving up on the blog. There was a long stretch in October were there weren't any substantive decisions released. Then, when I was halfway through a long post on Rovi Guides 2022 FC 1388, I got hit by Covid. I hope to start posting again later this week.

Simultaneous Invention Does Not Necessarily Indicate Obviousness

Betser-Zilevitch v PetroChina Canada Ltd 2022 FCA 162 Locke JA: Stratas, Rivoalen JJA affg 2021 FC 85 and 2021 FC 151 (costs) Manson J

            2,584,627 / Heavy Oil Well Production

There are a few points of interest in Locke JA’s brief decision for the FCA, affirming Manson J decision holding the 627 patent to be valid but not infringed, and dismissing both the patentee’s appeal on the issue of non-infringement and the defendant’s appeal of validity.

As discussed here, Manson J’s conclusion that the defendant’s product did not infringe turned on claim construction, and in particular construction of the term “first level.” A first point is that the parties did not agree on the standard of review. While the arguments weren’t canvassed, I expect the general thrust was that claim construction is a matter for the court, implying it is a question of law, reviewable for correctness; but on the other hand, construction of a technical term turns on what a skilled person would understand it to mean, and so is factually suffused, suggesting a standard of palpable and overriding error. Locke JA stated that “it is not necessary to decide the point. We would dismiss the appeal regardless of the standard of review” [3]. This suggests that the point remains open, though it could just be that Locke JA didn’t want to digress on a matter that didn’t make any difference.

The second claim construction point relates to the long-running debate over whether recourse to the description in interpreting a claim term is always permissible, or if it is permissible only if the term is ambiguous. As discussed here, the point seemed to have been settled in the recent FCA decision in Biogen v Pharmascience / fampidrine 2022 FCA 143 [73] in which Gauthier JA stated unequivocally that “the whole disclosure must be reviewed, even for words that would appear at first glance to be simple and unambiguous when reading only the claims.” The decision under appeal predated Biogen, and Manson J [FC 116–19] had noted the ambiguity in the contentious term, “first level,” before having recourse to the description to construe it. In affirming, Locke JA stated

[5] The Federal Court made no reviewable error in construing the term “first level”. It correctly concluded that the term is ambiguous, and appropriately had recourse to the disclosure of the 627 Patent to construe it.

This might be taken to suggest that recourse to the disclosure is permissible only if the term is ambiguous; if recourse to the disclosure is always permissible, why bother mentioning the Manson J “correctly” found the term to be ambiguous? So it is possible that this is a signal that there is an ongoing split in the Court of Appeal as to whether recourse to the disclosure is always permissible (though Rivoalen JA was on both panels). On the other hand, that may be reading too much into it. Locke JA’s statement is not strictly inconsistent with the view that recourse to the disclosure is always permissible; and on the facts, the term was ambiguous, Manson J did have recourse to the description, there was nothing wrong with that, and Manson J did correctly construe the term in light of the description. My best guess is that Locke JA simply didn’t want to digress on a matter that didn’t make any difference. In any event, even if there is some kind of split at the FCA, so far as the Federal Court is concerned, the clear statement in Biogen is binding until the FCA says otherwise.

On the issue of validity, the appellant pointed to the fact that a third party had made the invention at roughly the same time as being evidence of obviousness, and indeed, as being “primary” evidence of obviousness [9]. (It was not anticipatory as it had not been disclosed to the public.) Locke JA pointed out that “it does not follow that simultaneous invention necessarily indicates obviousness. . . . For instance, the person or persons who conceived the simultaneous invention may have themselves exercised inventive ingenuity in doing so” [9]. This seems to me to be clearly right: when many people are working on the same problem with similar tools, that two of them come up with the same solution may mean the solution is easy, or it may mean that two of the many people working on the problem were clever. It is very helpful to have the point made explicitly, as there isn’t much Canadian caselaw that I know of addressing it directly. Viscount Dunedin made the point in passing in Pope Appliance (1929) 46 RPC 23 (JCPC) 55, stating that “There are many instances in various branches of science of independent investigators making the same discovery,” and the English Court of Appeal in Mölnlycke v Procter & Gamble [1994] RPC 49 (CA) 132, remarked that “The inventive step may not have been large and it is not surprising to us that more than one inventor may have had broadly the same idea at around the same time.” Moreover, the conflict system under the old first-to-invent regime is an implicit recognition of the fact that simultaneous invention is quite common. With that said, while simultaneous invention in itself is not very helpful in establishing obviousness, the actual course of conduct of the other researchers may be useful, in the same way as the actual course of conduct of the inventors themselves: if other researchers arrived easily at the same solution to the same problem, this suggests obviousness, while if the other researchers struggled, this tends to show non-obviousness. However, the actual course of conduct of the other researchers is much less likely to be available.

Common General Knowledge and a Reasonably Diligent Search

Gemak Trust v Jempak Corporation 2022 FCA 141 Mactavish JA: Gleason, Roussel JJA revg Gemak v Jempak 2020 FC 644 Lafrenière J

            2,276,428 / 2,337,069

In the decision under appeal Lafrenière J granted summary judgment dismissing Gemak’s action for patent infringement against Jempak. My last post dealt with the FCA’s holding that Lafrenière J erred in deciding the matter on a motion for summary judgment. While that was sufficient to dispose of the appeal, the FCA went on to hold that Lafrenière J also made two further errors, namely an error of law in assessing the common general knowledge, which Mactavish JA chose to address in order to provide guidance in future cases [92], as well as error in assessing testing evidence.

Common General Knowledge

On the first point, in a passage quoted by Mactavish JA [94], with emphasis added, Lafrenière J stated that in assessing the common general knowledge:

[FC 97] The Court must assess what knowledge the skilled person would have obtained through a diligent search conducted using the means available at the relevant time.”

Focusing on the emphasized phrase, Mactavish JA pointed out that there is a well-established distinction between the prior art—any matter available to the public, no matter how obscure [97]—and the common general knowledge, which is more limited than the entire prior art, and indeed does not even encompass all information available to the skilled person.*

Mactavish JA then held that it was an error to apply the concept of a reasonably diligent search to the common general knowledge:

[99] The requirement of the reasonably diligent search has been applied - not with respect to the identification of the common general knowledge of the POSITA - but rather with respect to the discoverability of prior art relevant for the purpose of the obviousness or anticipation analyses: see, for example, E. Mishan & Sons, Inc. v. Supertek Canada Inc., 2015 FCA 163 at para. 22.

As a preliminary point, Mishan v Supertek was an obviousness case, and, so far as I know, the the requirement of the reasonably diligent search has never been applied in the context of anticipation; it has long been accepted that all prior art is relevant to novelty (subject to historical restrictions restricting foreign prior art to printed matter, presumably for evidentiary reasons, which were removed by the new Act in 1993). The concept of a reasonably diligent search had been applied in the context of obviousness, though, as Mactavish JA went on to note, that was changed by Hospira 2020 FCA 30, so that all prior art is now potentially potentially relevant for the purpose of the obviousness analysis [99]–[100]. (To be clear, that is not to say that all prior art is part of the CGK even in the obviousness context.)

Mactavish JA continued:

[100] That said, knowledge that is only discoverable through a reasonably diligent search is not, and has never been, considered to be part of the common general knowledge. The Federal Court thus erred in finding otherwise.

This is a negative definition—it says that information that is only discoverable through a reasonably diligent search is not considered to be “generally known” and so cannot form part of the CGK. This raises the question of whether the CGK excludes information requiring any kind of search. Lafrenière J [FC 97] had begun that paragraph by defining the common general knowledge as being “the knowledge generally known by the skilled person at the relevant time, and includes what the skilled person may reasonably be expected to know and be able to find out.” Mactavish JA [93] quoted this passage as being a correct statement of the law, “at least to the extent that the common general knowledge includes what the skilled person may reasonably be expected to know,” thus casting doubt on the phrase “and be able to find out.” However, in Novopharm v Janssen-Ortho / levofloxacin 2007 FCA 217 [25.3] the FCA defined the CGK as including “what the person may reasonably be expected to know and to be able to find out” (my emphasis). That was recently endorsed by the FCA in Tetra Tech v Georgetown Rail Eqpt 2019 FCA 203 [28]. Mactavish JA cannot have intended to cast doubt on these cases, which were not mentioned.

Further, allowance for at least some degree of search seems necessary. As Laddie J noted in Raychem Corp’s Patents [1998] RPC 31 (Pat) 40:

for something to qualify as common general knowledge it is not necessary to show that all or a majority of the workers in the field knew it, in the sense of having memorised it. For example in the days before the ready availability of pocket calculators, most technicians needed to use log tables for mathematical calculations. Few if any of them could memorise any of the log conversions in such a table yet those conversions would be common general knowledge in the patent sense.

Thus the view that information that can only be found through some sort of search, albeit perhaps very limited, is thus well supported by authority and logic.

This does not imply that the CGK extends to knowledge discoverable only through a reasonably diligent search. Looking up logarithms is routine. Perhaps the CGK includes information that the skilled person would reasonably “be able to find out,” but does not include information that is only discoverable through “a reasonably diligent search.” This distinction would reconcile Mactavish JA’s holding that knowledge that is only discoverable through a reasonably diligent search is not part of the CGK with the FCA decisions in Levofloxacin and Tetra Tech. I have not seen this distinction explicitly made before in Canadian law, but it does have antecedents in UK law.

In Raychem, Laddie J noted that in General Tire [1972] RPC 457 (CA), which remains the leading case on CGK, in Canada as much as in the UK, the Court at 482 described the CGK as being derived from “a common-sense approach to the practical question of what would in fact be known to an appropriately skilled addressee.” Laddie J continued (my emphasis):

The court is trying to determine in a common sense way how the average skilled but non-inventive technician would have reacted to the pleaded prior art if it had been put before him in his work place or laboratory. The common general knowledge is the technical background of the notional man in the art against which the prior art must be considered. This is not limited to material he has memorised and has at the front of his mind. In includes all that material in the field he is working in which he knows exists, which he would refer to as a matter of course if he cannot remember it and which he understands is generally regarded as sufficiently reliable to use as a foundation for further work or to help understand the pleaded prior art.

The notion that the technical background of the skilled person is not restricted to what they would have memorized has been extended to what is sometimes called the secondary common general knowledge. (That phrase seems to have been coined by Arnold J, as counsel in Actavis v Novartis [2009] EWHC 41 (Ch) [128]; while it does not seem to have caught on, even in the UK, it is a convenient term.) As Pumfrey J explained in Novartis v Ivax [2006] EWHC 2506 (Pat) [25]:

It is well settled that the common general knowledge is knowledge that must be attributed to the skilled person, without which the latter may be taken not to be skilled. To it must be added any knowledge that every skilled person should be taken to acquire before he embarks on the problem to which the patent provides the solution, as, for example, the relevant properties of cyclosporin if the problem is to formulate cyclosporin.

As this passage indicates, knowledge that a skilled person would acquire only when faced with a particular problem is not strictly part of the CGK. In KCI Licensing [2010] EWHC 1487 (Pat) [108], Arnold J has described it as “information that, while it was not part of the skilled addressee's common general knowledge, would have been acquired by him as a matter of routine before embarking on the problem to which the patented invention provides the solution.”

So, some information which the skilled person would not have memorized, but would always have readily to hand, is part of the CGK (logarithms), while other such information which the skilled person would acquire as a matter of routine, but only when faced with a specific problem (the properties of cyclosporin), is not part of the CGK. (Always with the proviso that the information must be regarded as a good basis for further action.) Jacob LJ made this distinction in Generics v Daiichi [2009] EWCA Civ 646 [25]:

Of course material readily and widely to hand can be and may be part of the common general knowledge of the skilled person – stuff he is taken to know in his head and which he will bring to bear on reading or learning of a particular piece of prior art. But there will be other material readily to hand which he will not carry in his head but which he will know he can find if he needs to do so (my emphasis).

This distinction may be important in some cases, as Jacob LJ went on to explain at [25]–[28]: in addressing the problem solved by the invention, the skilled person may acquire certain information through routine inquiry, and that information can then be brought to bear on that particular problem. But, unlike the common general knowledge, the skilled person would not have that information at hand in addressing an entirely different problem. If A would be discovered by routine inquiry in addressing problem X, and B would be discovered by routine inquiry in addressing problem Y, this does not mean that it would be obvious to combine A and B to solve problem Z, even though it might be obvious to combine A and B to solve problem Z if both A and B were part of the CGK, strictly defined.

In effect, UK law draws a distinction between two types of information that the skilled person would not have memorized, but which they would find as a matter of routine: there is information which they know is of general usefulness, and which they would apply to any problem, and information which they would only seek out in when faced with a specific problem. The former is part of the CGK, and the latter is not. To draw an analogy, a mechanic might have a toolbox he carries with him to work sites, corresponding to information the skilled person has memorized; then there are tools, such as a hex wrench in a non-standard size, that he does not have in his toolbox, but that he keeps back at the shop, and he knows it is available if necessary, corresponding to logarithm tables. These are both part of the CGK. Then there are special tools to remove a custom fastener on a particular brand of machine. When the mechanic comes across such a fastener, he will know he can readily get it from the manufacturer, and he will know how to use it to fix the machine, without the exercise of any ingenuity on either front; this corresponds to the secondary CGK. But he will not think to combine the special tool for one machine with the special fastener from another machine, to solve a problem he faces on a third kind of machine.

So, at least in English law, there is a distinction between information which the skilled person knows is available as a matter of routine, and information which the skilled person can find without undue burden when faced with a specific problem. The former is part of the CGK and the latter is not.

This may be the kind of distinction Mactavish JA had in mind, though I’m not entirely sure. After all, she seemed to cast doubt on the idea that the CGK includes information that the skilled person would be able to find out, but it is clear that information may be part of the CGK even if the skilled person would not have it memorized. And it is by no means clear that the distinction necessary to reconcile Mactavish JA’s decision in this case with Levofloxacin and Tetra Tech—which is to say the distinction between information the skilled person would be able to find out and the information discoverable in a reasonably diligent search—corresponds to the distinction drawn in UK law. On the other hand, if we consider that the information discoverable in a reasonably diligent search corresponds to the secondary common general knowledge, as that term is used in English law, then it is indeed true that such information is not and never has been part of the CGK.

I must say that it strikes me as somewhat harsh for Mactavish JA to have criticized Lafrenière J on this point. The distinction is “subtle,” at least in the opinion of Kitchin J (now of the UKSC), at first instance in Generics v Daiichi [2008] EWHC 2413 (Pat) [40]. Moreover, the error, such as it was, made no difference in this case. There was no dispute as to the common general knowledge [FC 4], [FC 101], so there is no particular piece of information that was include by Lafrenière J that would be excluded by Mactavish JA’s approach.

Further, it is worth pointing out even if information that is only discoverable in reasonably diligent search is not part of the CGK, that does not imply that it cannot be applied outside the context of obviousness. For example, it is very well established that patent is enabling even if the skilled person cannot practice the invention without carrying out some experiments, so long as those do not require undue effort: see BRP v Arctic Cat 2018 FCA 172 [78]. Presumably the skilled person can also be expected to carry out a routine literature search. When the patent claims a compound that can be made using conventional methods, it is common for the specification to say as much, typically referring to a leading handbook or a journal article for the details of the method. Such a specification is undoubtedly sufficient, even if the ordinary skilled person might have to actually consult the work referred to in order to carry out the synthesis. Suppose the specification stated that the compound could be prepared by conventional methods, but failed to actually cite the leading textbook. The specification would no doubt still be sufficient if the details of the method could be found in the standard textbook that the skilled person would consult as a matter of routine. The parallel with secondary CGK in the obviousness context is exact, as the skilled person attempting to practice the invention in light of the specification is faced with a specific problem, and so can be expected to carry out routine research to address that problem.

So far as I can tell, the distinction between information that a skilled person knows of and would be able to find out as a matter of routine, and information that the skilled person would find out after a search in light of a particular problem, only matters in the context of obviousness, and the problem of combining obscure prior art. The point made by Jacob LJ, that secondary CGK is not CGK strictly speaking, means that two pieces of prior art that are both only secondary CGK cannot be combined to make the invention obvious. This point would be better addressed explicitly, as part of that ongoing discussion, rather than with an abstract definition of the CGK.

*As an aside, Mactavish JA stated that a piece of knowledge only becomes general knowledge “when it is generally known” and “accepted without question” by those skilled in the art [96], quoting from Cefaclor liability 2009 FC 991 [97], which quoted from General Tire [1972] RPC 457 (CA) 482–83, which in turn quoted from British Acoustic Films Ltd v Nettlefold Productions (1936) 53 RPC 221 (Ch) 250. However, as the English Court of Appeal noted in General Tire, 483, in a passage also quoted in Cefaclor liability 2009 FC 991 [97], “accepted without question” may be “putting the position rather high”; the Court of Appeal indicated that “generally regarded as a good basis for further action” is preferable. The “good basis for further action” formulation is now generally accepted: see also Mylan v Eli Lilly / tadalafil 2016 FCA 119 [24]. Nothing turned on the point and I am sure that Mactavish JA did not intend to hold that “accepted without question” is the correct standard, as her focus was on the distinction between the prior art and the common general knowledge; that is, the decision focuses on what it means for information to be eligible to be part of the CGK because it is “generally known”, while recognizing that not all information that is generally known is part of the CGK.

Testing Evidence

Turning to the testing evidence, a key issue was whether Jempak’s detergent pods had detectable levels of carboxymethyl cellulose [CMC] in the coating, which was an essential element of the claims. Jempak’s expert gave evidence that there was no detectable CMC, and this evidence was criticized by Gemak’s expert on the basis that the testing method used by Jempak’s expert was not sufficiently sensitive. Lafrenière J rejected this, partly on the basis that Gemak’s expert did not have experience with the kind of detergent formulations at issue, and consequently he “did not provide an opinion from the perspective of the skilled person of the Patents” [FC 129], [107]. But Mactavish JA pointed out that Gemak’s expert was not construing the claims, but rather was providing expert evidence with respect to the question of infringement. Infringement is a question of fact. In this case, the question was whether or not the coating in fact contained CMC, not whether a person skilled in the art would have been able to detect the CMC as of the date of publication. Consequently, there is no requirement that the testing method used by the expert witness is one that would have been used by the skilled person:“Reviewing courts have . . . endorsed the use of analytical chemistry techniques that would not have been available to a POSITA at the relevant time or that would have been beyond the abilities of a POSITA” [108].

Putting the Brakes on Summary Disposition?

Gemak Trust v Jempak Corporation 2022 FCA 141 Mactavish JA: Gleason, Roussel JJA revg Gemak v Jempak 2020 FC 644 Lafrenière J

            2,276,428 / 2,337,069

The past couple of years have seen a significant shift in practice related to summary judgment and summary trial. The old practice, as I understand it, is that summary judgment was almost never granted, on the view that patent trials normally turn on the expert evidence and the credibility of expert witnesses can only properly be assessed in a viva voce trial. As Manson J put it in Canmar v TA Foods 2019 FC 1233 [45]–[46], for a decade after the FCA restricted the availability of summary judgment 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]. I believe Canmar, affd 2021 FCA 7, was the first in the new wave, but since then we have seen an upsurge in decisions granting summary disposition. The FCA decision in Gemak v Jempak suggests that the brakes might need to be applied.

In the decision under appeal Lafrenière J granted summary judgment dismissing Gemak’s action for patent infringement against Jempak. Lafrenière J acknowledged that the court has been reluctant to grant summary judgment in patent cases, because they often turn on the credibility of expert witnesses [77], [FC 4], but he nonetheless held that summary judgment was appropriate in this case because “there is no substantial conflict of opinion evidence. Jempak’s expert is the only witness who provides an informed and purposive claim construction of the terms at issue from the perspective of a skilled person” [FC 4], [78]. Lafrenière J entirely dismissed the evidence of Gemak’s expert, Dr Frankenbach [FC 110], [81]–[82], on the basis that she gave “evasive and defiant responses”, “conducted herself like an advocate instead of a neutral objective expert” and generally “failed to provide fair, objective and non-partisan opinions” [FC 104], [FC 110], [80]–[81]. However, Mactavish JA pointed out that much of the difficulty in Dr Frankenbach’s testimony was due to the combative stance taken by counsel for Gemak, and the conduct of counsel should not reflect negatively on the credibility of the witness [84]–[85].

Further, Lafrenière J remarked on “evasive and defiant responses from Dr. Frankenbach” and found the evidence of Dr. Frankenbach to be “wanting and problematic in many respects.” But Mactavish JA stated that

[86] a review of the transcript of her cross-examination suggests other possible interpretations of her evidence. Rather than being ‘evasive and defiant’, the transcript could be read to suggest that Dr. Frankenbach was a careful witness, one who wanted to be sure that she understood questions before answering them, and one who would not allow herself to be pushed around by counsel.

Importantly, she went on to state that “it is very difficult to infer a hostile attitude on the part of a witness from a bare review of a transcript, in the absence of an ability to evaluate his or her viva voce testimony” [87].

The FCA consequently held that it was “a palpable and overriding error on the part of the Federal Court to make the negative credibility findings that it did with respect to the evidence of Dr. Frankenbach based on a transcript of her testimony, and to decide the case in reliance on those findings” [90]. The FCA directed that the matter proceed to trial [112].

The interesting question arising from this decision is whether it is a signal from the FCA that the recent enthusiasm for summary disposition needs to be tempered, or whether the decision simply turned on the facts of the particular case.

In support of the view that it turned on the facts of the case, the key point in the FCA holding was that Lafrenière J’s decision explicitly turned on a negative credibility findings, and it was an error to make such a finding based on a transcript. On the other hand, the FCA took the opportunity to review the principles governing summary judgment at some length [61]–[74], even though there was no dispute between the parties as to those principles [61]. Many of Mactavish JA’s statements were phrased in general terms, and she emphasized the importance of viva voce evidence: “The jurisprudence is clear that issues of credibility ought not to be decided on motions for summary judgment” [68]; “the difficulty in assessing the credibility of expert witnesses in complex patent cases on the basis of voluminous paper records was long recognized” as a defect in the old PM(NOC) procedure [69]; and “ the lack of viva voce testimony provided for in the NOC Regulations was one of the inadequacies in the old regime” that led to it being modified to provide for a full trial [70]. These are exactly the reasons why summary judgment was traditionally avoided. Further, Mactavish JA summarized by saying that “[c]ases should therefore go to trial where there are serious issues with respect to the credibility of witnesses” [71]. This was phrased as a general propostion. Moreover, in support she cited, inter alia, MacNeil Estate 2004 FCA 50—the decision which, in Manson J’s account, put the brakes on summary trial in the first place. She also relied on Suntec v Trojan Tech 2004 FCA 140, which also predates Hryniak. Mactavish JA made the general observation that “while patent infringement issues are not by definition excluded from the ambit of the summary judgment process, they tend to raise complex issues of fact and law that are usually better left for trial” [91]. While she did go on to say that “this is not a hard and fast rule” and “there will be cases where use of the summary judgment process is appropriate,” this is a clear statement of a general principle, not a point that was confined to the facts of this case.

While the FCA discussion focused entirely on summary judgment, it seems to me that many of the observations, such as those related to the need for viva voce evidence, apply with equal force to summary trial; the FCA’s central holding was that it was “a palpable and overriding error on the part of the Federal Court to make the negative credibility findings that it did with respect to the evidence of Dr. Frankenbach based on a transcript of her testimony, and to decide the case in reliance on those findings” [90].

Time will tell, but for now my sense is that the FCA is sending a message that the Federal Court should be more cautious in granting summary disposition, at least when the credibility of witnesses is involved—but that will often be the case.

The problem is a difficult one. On the one hand, it would be desirable to reduce the cost of patent litigation, particularly in contexts where the expense of patent litigation is exploited to extract unjustifiable settlements. On the other hand, assessing patent validity and infringement on a reduced record may be unfair. Encouraging access to justice is certainly desirable, but the ‘justice’ aspect is as important as the ‘access’ part. Flipping a coin would be much cheaper than trial as a means of settling patent disputes, but no one thinks it is better for that reason. How to strike the balance is a very difficult question, as the cost and complexity of patent litigation cuts both ways.

With all that said, I will end with a very tentative proposal. Before American Cyanamid [1975] UKHL 1, a motion for an interlocutory injunction required a showing of a prima facie case on the merits. My understanding is that parties would use this to get what amounted to a non-binding opinion on the merits, on an abbreviated record, from the judge who would ultimately be hearing the case. The parties would often then settle in light of that opinion, but a party who thought they could do better on a full record was fully entitled to go to trial. (Over time the abbreviated record got longer and longer—the hearing in Cyanamid was three days at first instance and eight days in the Court of Appeal. One solution to that problem is better case management, rather than doing away with consideration of the merits, and it seems that most jurisdictions are now going that way.)

I wonder if it might be possible to adapt the motion for summary disposition to a similar effect. (I expect this would require an amendment to the Federal Courts Rules.) In particular, if the judge hearing the motion for summary disposition is of the view that one side had a prima facie weak case, but the matter was not suitable for summary disposition because, eg it was necessary to assess credibility viva voce, the judge might dismiss the motion, but at the same time issue what would amount to a non-binding direction on costs, to the effect that if the case turned out to be as weak as it appeared to be, costs would be assessed against the party with the weak case at a substantially elevated scale — say 75% rather than 25%. It would be non-binding, in the sense that the elevated costs award would not be automatic if the party against whom it was issued lost at trial. Rather, the trial judge would take it into account and award elevated costs if the party against whom it was issued had not improved their case at trial. If the party lost, but the judge was of the view that the full trial really had improved the court’s ability to assess the evidence, it would be open to the judge to ignore their prior directive and award costs on the normal scale. The party with the weak case would thereby be put on notice that there would be significant costs consequences if it proceeded to trial, unless it was confident that a trial really was necessary to present it’s position fairly. As with the old interlocutory injunction practice, this would provide an incentive to settle, based on a non-binding opinion on the merits from the judge who would ultimately hear the case. The difference is that in the interlocutory injunction case, the question was whether the plaintiff had a strong case, and in this suggestion, the question is whether one of the parties has a weak cases; but the basic concept of a preliminary assessment of the merits on reduced record is the same. Of course, a judge hearing a summary disposition motion would not be required to issue any such directive in dismissing the motion; it would remain open to the court to simply hold that the matter was not suitable for summary disposition.

I’m not a litigator, so I don’t have a good sense of whether this would work in practice. Indeed, I hesitated to post the suggestion at all. But I decided I might has well make the suggestion for consideration.

Date for Assessing Sufficiency Redux

Pharmascience Inc v Bristol-Myers Squibb Canada Co 2022 FCA 142 Locke JA: de Montigny, Monaghan JJA affg 2021 FC 1 Zinn J FC Selection

2,461,202 / 2,791,171 / apixaban / ELIQUIS

In Teva / sildenafil 2010 FCA 242 [79] and Idenix v Gilead 2017 FCA 161 [46], the FCA held that the correct date for assessing sufficiency is the filing date, not the date of issue. In my post “What Is the Date for Assessing Sufficiency?” I indicated that Locke JA in Pharmascience v Bristol-Myers Squibb 2022 FCA 142 may have reopened the question, with a decision that might be taken to suggest that the date of issue was appropriate. Steve Hundal, has a recent blog post arguing that on the contrary, Locke JA was simply saying that it is the specification as issued that is relevant in assessing sufficiency, without disturbing the prior FCA holding that sufficiency is assessed in light of the common general knowledge as of the filing date. This is in the same way that novelty is assessed as of the claim date, but on the basis of the claims as issued. On reflection, I’m sure that is indeed the best way to read Locke JA’s decision.

In my defence, I will say that Locke JA indicated that the question was “the date for determining sufficiency” [26] “the relevant date for determining patent sufficiency” [28], and he spent several paragraphs discussing Zoledronate 2013 FC 283 [179]–[188] which clearly concerned the date for assessing sufficiency. (He also adverted to Merck v Apotex 59 CPR(3d) 133 (FCTD) [115]–[120], which also, on it’s facce, concerns the date for assessing sufficiency, though both the argument and the analysis in Merck v Apotex were a bit peculiar.)

But Mr Hundal is right to point out that there are other passages that indicate that Locke JA’s was simply saying that sufficiency is assessed in light of the specification as issued, not at some earlier date: see [32], [33]; and [31], which draws the parallel with assessing claims as issued for novelty and obviousness as of the claim date, and for utility as of the filing date. Further, I now see that the distinction between the date for assessing sufficiency, and the document to be assessed—the specification as filed or at some later date—is made very clearly by Zinn J at first instance: see eg [FC 37], [FC 43]. And this way of reading Locke JA’s decision has the great virtue that it is entirely consistent with the holding in Teva / sildenafil or Idenix v Gilead that sufficiency is assessed as of the filing date; it also explains why Locke JA did not mention those cases.

So, I think we can consider it still settled that the filing date is the correct date for assessing sufficiency, though it is the specification as issued that must be sufficient, not the specification as it was at some earlier date.

Now, there is still a problem. Some of Locke JA’s remarks could be taken to suggest that amendments to the specification might make a specification sufficient even thought it was insufficient as filed: eg “subsection 27(6) and section 38.2 of the Patent Act, while limiting the matter that can be added to a patent application by way of amendment, do permit amendments, and without restriction as to whether such amendments might buttress the sufficiency of the specification” [36, my emphasis]; and “it would effectively read out subsection 27(6), which contemplates amendments to bring the application into compliance with the sufficiency requirements” [33]. This raises some difficulties. In Idenix, the specification at filing did not enable a skilled person to synthesize the claimed compound, and indeed, the applicant did not know how to do so. The information on how to make the compound was subsequently made public, prior to issuance. It would be problematic if the applicant could have incorporated that into the specification, thereby rendering it sufficient: as Lord Hoffmann noted in Biogen v Medeva [1996] UKHL 18 [81],“[i]t would be illogical if a patent which ought to have been rejected [on examination by the Patent Office] is rendered immune from revocation [by the court] by advances in the art between the date of application and the publication of the specification.”

I think the answer to the problem is that, as Mr Hundal notes, “[t]here is the practical question of whether the specification as issued can differ appreciably from the specification as filed, given that section 38.2 of the Patent Act does not allow amendments that cannot be reasonably inferred from the specification and drawings contained in the application on its filing date.” Locke JA is right to say that s 27(6) and s 38.2 contemplate amendments to the specification, and they do not expressly exclude amendments which buttress sufficiency. But the “reasonably be inferred” standard from the 38.2 is restrictive, and probably does, as a practical matter, exclude amendments that would cure an insufficient specification. And while Locke JA noted that 27(6) “contemplates amendments to bring the application into compliance with the sufficiency requirements” [33], any such amendments are still subject to s 38.2.