Amalgamation, Equitable Election, and Section 8 Claims

Teva Canada Limited v Wyeth LLC, 2011 FC 1169, Hughes J

The issue in this case is narrow and tricky, but it is also novel and interesting: what is the effect of a merger of generics when one of the generics was a licensee of the brand, and the other had a valid section 8 claim?

Wyeth entered into authorized generic agreement with Novopharm under which Wyeth licensed Novopharm to sell a generic version of a Wyeth drug. To protect Novopharm’s position as the authorized generic, Wyeth also agreed to make commercially reasonable efforts to enforce the patent against third parties. Ratiopharm then served an NOA on Wyeth. At Novopharm’s request pursuant to the agreement, Wyeth instituted NOC proceedings against ratiopharm. Wyeth lost, and ratiopharm brought a section 8 claim against Wyeth. So far there is nothing out of the ordinary. However, after Novopharm changed its name to Teva, Teva and ratiopharm amalgamated. What is the effect of Novopharm’s agreement with Wyeth on ratiopharm’s section 8 claim, in light of the amalgamation?

Double Costs under Rule 420 in Respect of Counterclaim

Eli Lilly Co. v. Apotex Inc. / cefaclor, 2011 FC 1143 Gauthier J (Costs)

This is a decision on costs related to 2009 FC 991 aff’d 2010 FCA 240, in which Gauthier J held in favour of Lilly in an infringement action against Apotex, and against Apotex in its Competition Act counterclaim against Lilly and Shionogi.

Gauthier J dealt with costs in the main action and the counterclaim separately. With respect to costs in favour of Shionogi on the counterclaim, the main question whether particular settlement offers triggered doubling of costs under Rule 420. Gauthier J affirmed that Rule 420 as amended requires only that the offer remain open until the start of the trial or hearing [25]-[36], and not until the matter is taken under advisement or judgment is rendered. Note that an offer that does not trigger Rule 420 may nonetheless be considered under the general Rule 400(3)(e).

Further, in an apparently novel point of general interest, Gauthier J held that “although there was only one scheduling order issued for the trial of the various proceedings in T-1321-97, the main action and the Competition Counterclaim were two completely distinct proceedings.” Consequently, a settlement offer in respect of the Competition Counterclaim had to remain open not just until the start of the trial as a whole, but until the start of the portion of the trial dealing with the counterclaim [27].

On the facts, one settlement offer made by Shionogi triggered Rule 420. Gauthier J declined to exercise her discretion to lower the amount payable under that Rule. She noted that Apotex had added Shionogi as a defendant two years after instituting the Competition Counterclaim against Lilly, and it had apparently done so primarily to get evidence from Shionogi [40]. Gauthier J stated that

[41] The Court should not be taken as condoning the practice of suing a party solely to facilitate the acquisition of evidence or to put pressure on a third party. There are more appropriate means to obtain evidence from a non-party, including a foreign company.

Gauthier J also noted that the Shionogi evidence was ultimately not particularly helpful [42], and while Apotex was entitled to “insist on the strict application of the rules of evidence with respect to the filing of documents,” and to obtain a procedural advantage in order to settle its Competition Counterclaim with Shionogi,” such decisions might have costs consequences: “it cannot expect to impose its choices on Shionogi or Eli Lilly” [49].

On the main action, Gauthier J was not able to assess whether Rule 420 was triggered. Rule 420 turns on a comparison between the offer and amount awarded, and at this point it remained too difficult to estimate the quantum [65]. Gauthier J noted that “in the context of bifurcated action, the application of Rule 420 can be difficult and will require more judicial consideration” [66].

Hints on Validity as a Defence to a Section 8 Action

Apotex Inc v Shire Canada Inc / modafinil (NOC) 2011 FC 1159 Near J aff’g 2011 FC 436 Tabib Pr

This motion raises, albeit tangentially, the important question of whether infringement is available as a defence to an action for section 8 damages under the PM(NOC) Regulations. By way of background, Cephalon is the owner of the patent in question and Shire is a licensee. Both were parties to NOC proceedings, 2008 FC 538, in which Apotex prevailed. Cephalon has since commenced an infringement action against Apotex (T-609-09), but Shire is not a party to that action [5]. Apotex is now seeking section 8 damages from Shire, and this motion arises from those proceedings. Shire had previously tried to raise infringement as a defence, but had wanted to base the defence entirely on the outcome of the Cephalon action, without bringing any independent evidence in the section 8 damages proceeding. This amendment was not permitted (2010 FC 828 affm’d 2010 FC 1001), on the basis that the Shire had not pleaded any material facts on which the court could make any direct determination. 

Shire then sought to amend its Statement of Defence to plead infringement as a defence and counterclaim. Prothonotary Tabib refused to allow this amendment on the basis that the amendment had not been sought in a timely matter. She therefore made no comment as to whether such a defence would be permitted substantively (see my post on that decision). In this decision, Near J, reviewing the matter de novo as raising a question vital to the final issue [16], has affirmed the decision of Tabib Pr, again primarily on the basis that Shire should have brought forward the issue of infringement earlier [24]. However, Near J also hinted at the substantive point, stating “the infringement aspect is not necessarily the ‘true substance’ of section 8 proceedings directed at damages of Apotex being kept off the market. Any potential basis for infringement could be pursued by way of a separate action or by Shire joining the Cephalon proceedings already in progress without delaying a section 8 resolution” [21]. This suggests that even if Shire had pleaded infringement as a defence in a timely manner, the pleading might have been struck. However, Near J also remarked that “Shire should have brought the issue of infringement forward in its initial pleadings” [24], suggesting that this defence would have been permitted if pursued in a timely manner.

Interlocutory Injunctions in Australia

Apple v Samsung Electronics [2011] FCA 1164 (Aus)

In my article Interlocutory Injunctions and Irreparable Harm in the Federal Courts, 88(3) Can Bar Rev 515, I argued that the threshold for irreparable harm imposed in the Federal Courts is too high. My review of the Chancery cases in which the concept developed showed that adequacy of damages did not have a distinct role: “[w]hen the courts of equity declined to provide a remedy to the plaintiff, they would often say that this was because the remedies at law were adequate, but this was in effect a statement of the conclusion on the balance of convenience, rather than a distinct condition precedent to taking jurisdiction.” Accordingly, it would be preferable to abandon the requirement of irreparable harm entirely.

Because my review was historical, I neglected comparative law. In particular, I am embarrassed to admit that I was entirely unaware of the extremely interesting approach long taken by the High Court of Australia, which was brought to my attention by the recent decision of the Australian Federal Court in Apple v Samsung Electronics [2011] FCA 1164, reported by IPKat here. The law applied in that case derives from the decision of the High Court in Beecham Group v Bristol Laboratories [1968] HCA 1, a patent case. Beecham established a two-part test for an interlocutory injunction, which considered the probability of success and the balance of convenience; irreparable harm is not a factor at all. It is notable that this test was based directly on an analysis of the original Chancery jurisprudence. In Australian Broadcasting Corporation v O’Neill [2006] HCA 46 Gummow and Hayne JJ at [65]-[72] affirmed this test. Their opinion explained further that the assessment of the merits did not require a showing that it was more likely than not that the plaintiff would succeed; in this the decision was consistent with Lord Diplock’s speech in Cyanamid [1975] A.C. 396. However, the High Court expressly rejected Lord Diplock’s holding that the court need only be satisfied that the plaintiff’s claim is not frivolous or vexatious, for the very good reason that Lord Diplock’s statements “obscure the governing consideration that the requisite strength of the probability of ultimate success depends upon the nature of the rights asserted and the practical consequences likely to flow from the interlocutory order sought.”

In my Irreparable Harm article I argued that the correct overarching principle is the “lower risk of injustice” stated by Hoffmann J in Films Rover International v Cannon Film Sales [1986] 3 All E.R. 772 at 780 (Ch.):

The principal dilemma about the grant of interlocutory injunctions. . . is that there is by definition a risk that the court may make the ‘wrong’ decision. . . . A fundamental principle is therefore that the court should take whichever course appears to carry the lower risk of injustice if it should turn out to have been ‘wrong.’

The general Australian approach, as I now understand it, is consistent with this principle, and seems entirely sound. The Beecham decision also had some very interesting specific guidelines regarding patent cases in particular. I regret that neglected this important jurisprudence when I wrote my article.

Relevance of Simultaneous Invention to Obviousness

Apotex inc. v. Warner-Lambert Company LLC 2011 FC 1136 Pinard J

This is an appeal from an order of Prothonotary Milczynski, compelling the defendant patentee to disclose when it became aware of patent filings by others that including claims related to the patentee’s invention. The grounds for the order were that such information was relevant to the prior art, and, more interestingly, that “one element of the obviousness of the patents in suit is the fact that other scientists in the field came to the same invention in and around the same time” [7]. In other words, the order raises the question of the relevance of simultaneous invention to the question of obviousness.

As I argued a post last week, so-called “secondary” evidence is not substantively secondary. With that said, not all secondary evidence is made equal. Failure of others is especially compelling evidence of inventiveness. As the High Court of Australia noted in Lockwood v Doric(No 2) [2004] HCA 58 at [119], “When skilled, non-inventive persons, and in this case also a skilled inventive person, looking for improvements, fail to arrive at the invention, it is impossible to suggest that it would have been obvious to the skilled and not necessarily inventive person.” The combination of long-felt need and commercial success, traditionally the strongest secondary evidence, is ultimately derived from this point, as those circumstances permit the inference that others tried and failed.

However, the converse is not true. Success of others – simultaneous invention – in itself, does not generally establish obviousness, as those others may also be inventive, particularly since invention does not require genius. As the English Court of Appeal noted in Mölnlycke v Procter & Gamble Ltd, [1994] RPC 49 (CA) at 132 “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.” This is especially likely in an active area of research. When several companies are pursuing a lucrative goal with talented researchers, it should not be surprising that several may arrive at the same solution, even though it requires invention. This is implicit in the old system of first-to-invent: as the Fed Cir has said 620 F.2d 1247 (1980): “Nothing should be more clear in the law of patents than the concept that the same patentable invention may be contemporaneously made by more than one inventor,” noting “The statute establishing interferences in the PTO, 35 U.S.C. s 135, is entirely premised on the concept that the same nonobvious invention may be contemporaneously made by a plurality of inventors.”

With that said, evidence of simultaneous invention may be relevant in light of the details of the circumstances of the invention. If all inventors had difficulty in arriving at the invention, simultaneous invention may reinforce a conclusion of non-obviousness; on the other hand, if several others arrived easily at the invention, this would be evidence of obviousness, even though the patentee might have struggled.

“Secondary” Evidence of Obviousness Is Not Secondary in Importance

Two types of evidence are normally adduced in the obviousness inquiry: evidence relating to the circumstances of the invention, such as long-felt need and commercial success, and evidence of expert witnesses as to how a person skilled in the art at the time would have approached the problem. It is now normal to refer to the former as “secondary” evidence. There is nothing wrong with this as a label, but in Mölnlycke v Procter & Gamble Ltd, [1994] RPC 49 (CA) at 113, the English Court of Appeal stated that “[t]he primary evidence will be that of properly qualified expert witnesses who will say whether or not in their opinions the relevant step would have been obvious to a skilled man having regard to the state of the art. All other evidence is secondary to that primary evidence,” and that secondary evidence “must be kept firmly in its place. It must not be permitted, by reason of its volume and complexity, to obscure the fact that it is no more than an aid in assessing the primary evidence.” In other words, “secondary” is not merely a label, but indicates that such evidence is intrinsically of lesser significance than the evidence of expert witnesses. This view, which has since been repeated in a some English decisions, is wrong both in principle and as a matter of Canadian law. The true rule, in Canada, as well as Australia, and indeed in England, is that the court must consider all relevant factors including circumstantial evidence, giving weight to each according to the circumstances of the case: see e.g. 2007 FCA 217 at [27]. It is nonetheless useful to distinguish these two types of evidence, as each is subject to different frailties: assessment of obviousness based on the evidence of expert witnesses is subject to the hindsight bias, while establishing causation is the main problem with circumstantial evidence. While there is no formal hierarchy of evidence in Canadian law, the general tendency is the opposite of that suggested by the “primary / secondary” labels. When circumstantial considerations point strongly in the direction of inventiveness, an argument in favour of obviousness based on expert opinion evidence will rarely prevail.

Computer Implemented Inventions in the UK

Halliburton Energy Inc’s Patent [2011] EWHC 2508 (Pat) Birss J

This recent decision of Birss J in the English Patents Court on the patentability of computer-implemented inventions is of some interest in light of the appeal pending before the FCA in Amazon.com 2010 FC 1011 under appeal A-435-10. While Amazon.com is about business methods, the decision of the FCA in Schlumberger 56 CPR (2d) 204 (CA), which dealt with computer-implemented inventions, it is relevant for its general approach to patentable subject matter, and it appears that the FCA in Amazon.com will consider the implications of Schlumberger: see communication of 2011-07-07. While Birss J’s decision is not high authority in itself, Birss J undertook a thorough review of the UK and EPO jurisprudence, which makes it clear that the application which was denied in Schlumberger would now be granted in England, despite the fact that the UK Patents Act, 1977 s 1(2)(c), following the EPC Art 52(2), expressly provides that “a program for a computer” is not patentable “as such.”

Because of the statutory difference, this conclusion is not directly relevant to Canadian law. Nonetheless, it is not unreasonable to look to international law, whether statutory or otherwise, as a guide to general principles. The Commissioner did exactly this in the decision under appeal in Schlumberger, CD 441. Because of the paucity of Canadian case-law, the Commissioner’s decision was based primarily on US Supreme Court decisions. In an article in the forthcoming issue of the CIPR (which has just gone to press), “The Rule Against Abstract Claims: A Critical Perspective on US Jurisprudence,” (2001) 27(1) C.I.P.R. 3 (draft here), I argue that Schlumberger was wrongly decided because the USSC decisions on which it was based are inconsistent with SCC jurisprudence. The Commissioner in Schlumberger also pointed at p.16 to the statutory restriction in English law as supporting its conclusion, upheld by the FCA, that a restrictive approach to computer-implemented inventions should be adopted. It is now clear that the Commissioner’s interpretation of the English provisions was overly simplistic, and consequently incorrect. That English law has now adopted a generous approach to the patentability of computer-implemented inventions, despite the statutory restriction, reinforces the conclusion that Schlumberger was wrongly decided.

Connection Between Patent Remedies and Competition Act Claims

Dywidag Systems International, Canada, Ltd. v. Garford Pty Ltd. 2011 FCA 264 Mainville J

I don’t normally comment on procedural matters, but there haven’t been many substantive decisions lately, so I thought I would summarize this motion.

Garford sued Dywidag on the basis of patent infringement and under the Competition Act. Dywidag obtained an order for bifurcation of liability and monetary remedy, which order was set aside by Zinn J 2010 FC 581, essentially solely on the basis that the financial information necessary at the remedy phase overlapped with the financial information necessary to prove liability under the Competition Act claim. Dywidag appealed (the Bifurcation Appeal). Subsequently, Russell J 2010 FC 996 granted a motion for summary judgment on Competition Act claim on the basis that the limitations period had run. That decision has also been appealed (the Competition Act Appeal).

In the present motion Dywidag sought to amend its Notice of Appeal in the Bifurcation Appeal, presumably to account for the implications of Russell J's Competition Act decision, and to ensure that the Bifurcation Appeal would be heard immediately after the Competition Act Appeal, even though the proceedings in the Bifurcation Appeal were much further advanced, and, but for the order sought, would be heard first. In light of the close connection between Zinn J's refusal of the bifurcation order and the Competition Act claim, Mainville J granted the orders sought by Dywidag.

Week of 18 September - No Decisions

No patent decisions were released on the Federal Courts' websites for the week of 18 September.

The Argument in Favour of the False Promise Doctrine

I have been critical of the false promise doctrine in past posts, but few arguments are entirely one-sided. The argument in favour of the false promise doctrine is obscured because the traditional justification is based on the theory that the Crown has been deceived in the grant. This theory is unpersuasive in the modern patent system in which a patent is obtained as of right for an invention that is substantively patentable. So, Blanco White §4-403 cites Hatmaker v Nathan (1919) 36 RPC 231 (HL) for the proposition that “where a patentee promises (expressly or impliedly) the attainment of a certain result, and this is not obtained, . . .the patent will be invalid: for ‘protection is secured by the promise of results; it does not, and ought not to, survive the proved failure of the promise to produce the results,’” and then in the footnote he remarks acerbically that “It is not, of course, in actual fact; but the House of Lords has repeated this dictum until it is of unimpeachable authority.”

The better defence of the doctrine is based on the modern understanding of the purpose of the utility doctrine, which is to govern how far upstream in the R&D process an invention may be patented.

Week of 11 September - No Decisions

No patent decisions were released on the Federal Courts' websites for the week of 11 September.

A Limit on the Windsurfing / Pozzoli Obviousness Framework in Pharmaceutical Cases

Astrazeneca Canada Inc. v. Mylan Pharmaceuticals ULC / anastrozole (NOC) 2011 FC 1023 Rennie J

The four-step Windsurfing/ Pozzoli approach to the obviousness determination, endorsed by the Supreme Court in Sanofi 2008 SCC 61 at [67], is now routinely used, but it is no more than a framework that need not, and should not, be used when it is not helpful: Sanofi [61], [63]; Weatherford 2011 FCA 228 [67]. Astrazeneca / anastrozole (NOC) illustrates one context in which the limits of the Pozzoli framework are reached. As is common, the claimed compound, anastrozole, was developed by modifying a lead compound in an attempt to improve its properties. Rennie J held that there was no obvious lead compound, and that was sufficient reason to find that the invention was not obvious, whether or not the subsequent modifications were obvious [214]. If indeed the selection of the lead compound is not obvious, the non-obviousness of the claimed invention follows, whether or not the lead compound is part of the prior art. (Note that the non-obviousness conclusion was supported by compelling secondary evidence [221]-[227]).

An Emerging Framework for Construction of the Promise of the Patent

Astrazeneca Canada Inc. v. Mylan Pharmaceuticals ULC / anastrozole (NOC) 2011 FC 1023 Rennie J

Construction of the promise of the patent is currently a hotly contested area of Canadian patent law, as a valuable and otherwise valid patent may be held invalid for promising too much. Despite this, there is little jurisprudence on how to construe that promise, as Hughes J noted in GlaxoSmithKline / rosiglitazone, 2011 FC 239 at [83]. Rennie J’s debut decision in substantive patent law marks a significant advance in developing a coherent jurisprudence on this point, that is consistent with general principles of claim construction and statutory interpretation. I would say that Rennie J’s decision is a large step in the right direction, except that my own view, expressed in a number of previous posts, is that the entire false promise doctrine is misguided. But Canadian law, and FC judges, are stuck with this doctrine until a higher court rules otherwise, and Rennie J’s opinion is certainly a most welcome contrast to the very disappointing analysis of the FCA in Pfizer v Apotex / latanoprost (NOC) 2011 FCA 236, that I blogged about two weeks ago.

The Rule Against Abstract Claims in the Federal Circuit post-Bilski

Classen Immunotherapies, Inc. v. Biogen Idec (Fed. Cir. 31 Aug 2011)

As the Federal Courts have been quiet recently, I thought I’d take the opportunity to comment on the decision of the US Federal Circuit in Classen Immunotherapies, remanded to the CAFC by the USSC for reconsideration in light of Bilski. Classen is very interesting for two reasons: it is a rare instance of the correct application of the rule against abstract claims to hold a claim invalid; and it provides contrasting interpretations of Bilski in the majority dissenting opinions.

The three patents at issue where based on the purported discovery that early immunization reduces the risk of immune-mediated diseases, including eg diabetes. The district court had granted summary judgment that all of the claims in the patents were invalid as being directed to an abstract idea. Two of the patents claimed a method of comparing two immunization schedules, choosing the one with lower risk, and immunizing according to the lower risk schedule: see claim 1 of the ‘739 patent. The third ‘283 patent claimed a method of determining whether an immunization schedule affects the risk of immune-mediated disease by comparing the incidence of such diseases in two groups of mammals treated with different immunization schedules. Thus both types of claim were based on the discovery that the immunization schedule affects the risk of immune-mediated disease, but the first type of claim included the step of actually immunizing a patient according to the preferred schedule.

Promise of the Patent Determined Without Reference to the Description

Pfizer Canada Inc. v. Apotex Inc. / latanoprost (NOC) 2011 FCA 236 Trudel JA; Sharlow, Stratas JJA rev’g 2010 FC 447 Heneghan J 

There is not much new law in the FCA’s latest latanoprost decision, but it is significant nonetheless for an extremely aggressive application of the false promise doctrine; the FCA construed the promise of the patent without any reference to the description, and, on the basis of this construction, reversed the Applications Judge and held the claims at issue invalid.

The key claims in the patent at issue, 1,339,132, were a compound claim for latanoprost, a prostaglandin derivative, and a claim for the use of latanoprost in the treatment of glaucoma or ocular hypertension. Prostaglandins had previously been of interest in treating glaucoma, but most (or all) of the prior art prostaglandins were of limited practical use for that purpose because of side effects, primarily ocular irritation.

A crucial issue on appeal was the construction of the promise of the patent. According to standard Canadian law, the utility of the invention is measured by the promise of the patent. This means that even if the invention is sufficiently useful to warrant a patent, the patent will nonetheless be invalid for lack of utility if it promises more than it delivers. At the first instance, Apotex’s argument, which was rejected by Heneghan J, was that the patent promised that side effects would be eliminated or substantially reduced in chronic treatment of glaucoma [FC 69, 192]. The issue was significant because the inventors had only conducted “single dose” studies of eye irritation caused by latanoprost. If the patent promised reduced irritation when given as a single dose, then, as Heneghan J held, demonstrated utility was established. This was not disputed on appeal. Thus it is clear that the invention had that “scintilla” of utility that is accepted as being adequate to satisfy the utility requirement if no higher degree of utility is promised. But if, as Apotex argued, the patent promised that irritation would be reduced even with chronic use, utility depended on sound prediction. The Court of Appeal agreed with Apotex as to the promise of the patent, and in the second issue on appeal, went on to hold that the factual basis for a sound prediction was not established by the single dose studies, and consequently the claims in question were invalid.

So, validity turned on the construction of the promise of the patent, and specifically whether the patent promised that irritation would be minimal even with chronic use. The FCA reviewed the question for correctness as a matter of law [17], and having determined that Heneghan J erred in her interpretation of the promise, came to its own conclusion based on the record, without remitting the matter to Heneghan J [20].

Is Claim Construction Really a Question of Law?

Phostech Lithium Inc v Valence Technology, Inc 2011 FCA 237 Pelletier JA: Noël, Mainville JJA, affirming 2011 FC 174, Gauthier J 

The trial decision of Gauthier J in Valence v Phostech turned primarily on the facts, and it is no surprise that the FCA has affirmed, in an appeal that “raises no novel questions of law” [1].

The invention in question was for a method for making lithium mixed metal cathodes for lithium ion batteries by using “carbothermal reduction” (CTR). The main issue at trial was whether the process used by Phostech, the defendant, used CTR. As a matter of science it was difficult to determine whether the conditions inside the closed industrial kiln used by Phostech would actually result in CTR, but the question, which Gauthier J decided against Phostech, was purely factual. Phostech chose, no doubt wisely, not to even raise this point on appeal.

Instead Phostech focused on a claim construction point. As the FCA noted, claim construction is a question of law, so the standard of review is correctness [26]. While this point is well settled, this characterization of claim construction has always struck me as a bit odd. The claim is construed as it would be understood by a person skilled in the art, which means that the trial judge must receive expert testimony as to the meaning of various terms and the background necessary to understand the technology, then use this factual information to put herself in the shoes of a skilled person reading the claims, before determining the meaning of the claims. This looks to me quite a lot like a question of mixed fact and law. In Phostech this FCA squared this circle by noting that “[w]hile the interpretation of the [term in issue] is a question of law, it must be construed in the light of the evidence as to its meaning to the person skilled in the art” [29]. The FCA then noted that the trial judge heard conflicting expert evidence, and preferred that of the plaintiffs’ [30], and after two paragraphs quoting from the trial judge’s summary of the evidence, concluded “the trial judge’s interpretation of the [term in issue], resting as it does on the evidence which she accepted as to the person skilled in the art’s understanding of the term, is unassailable” [33]. This looks quite a bit like a deferential review that would be applied to a question of mixed fact and law.

My thanks to Alan Macek and his very useful site IPPractice.ca for bringing this case to my attention before it was released on the FCA website.

Week of 14 August - No Decisions

No non-procedural patent decisions were released on the Federal Courts' websites for the week of 14 August.

Week of 7 August - No Decisions

No non-procedural patent decisions were released on the Federal Courts' websites for the week of 7 August.

Week of 31 July - No Decisions

No non-procedural patent decisions were released on the Federal Courts' websites for the week of 31 July.

The Relationship Between Utility and Obviousness

Hoffmann-La Roche Limited v Apotex Inc / MMF (NOC) 2011 FC 875 O'Reilly J

Regular readers of this blog will recall that I have been critical of the “false promise” doctrine, which holds that utility is measured by the promise of the patent. In the MMF case, the patentee, Roche, directly challenged this doctrine, arguing that an invention need only satisfy the minimum general requirement for utility, and not whatever greater utility might have been promised in the description. O'Reilly J rejected Roche’s submissions on this point. Unfortunately, the nature of the invention in this case complicated the argument by implicating difficult questions regarding the treatment of utility in selection patents, and I will argue in this post that O'Reilly J's reasons for affirming the false promise doctrine are closely related to issues raised by selection patents. This means that in order to revise the false promise doctrine, it will first be necessary to clarify the law relating to selection patents.

Fraud on the Patent Office: Lessons Learned from the US Experience

Corlac Inc v Weatherford Canada Ltd 2011 FCA 228 Layden-Stevenson JA: Nadon, Evans JJA substantially affirming 2010 FC 602 Phelan J

As noted in yesterday’s post, in Corlac v Weatherford the Court of Appeal held that paragraph 73(1)(a) of the Act cannot be relied upon to attack the validity of a granted patent. Corlac is also an important decision on the doctrine of fraud on the patent office under subsection 53(1). The decision has a thorough treatment of materiality of false attribution of inventorship under this provision, and it will now be the leading case on this point. More broadly the decision of the FCA also signals a generally cautious approach to subsection 53(1).

Deemed Abandonment under Section 73 Cannot Be Used to Attack a Granted Patent

Corlac Inc v Weatherford Canada Ltd 2011 FCA 228 Layden-Stevenson JA: Nadon, Evans JJA substantially affirming 2010 FC 602 Phelan J 

In Corlac v Weatherford the Court of Appeal has clarified a controversial point of law regarding misrepresentations to the Patent Office. Two provisions of the Act bear on misrepresentations to the Patent Office: subsection 53(1), which provides that “[a] patent is void” if there are material misrepresentations in the application, and paragraph 73(1)(a) which provides that “[a]n application for a patent in Canada shall be deemed to be abandoned if the applicant does not reply in good faith to any requisition made by an examiner.” Relying primarily on the distinction between a patent and an application apparent in these two sections, the Federal Court of Appeal held that paragraph 73(1)(a) cannot be relied upon to attack the validity of a granted patent [150]:

To be clear, the concept of abandonment in paragraph 73(1)(a) operates during the prosecution of the application for a patent. Its operation is extinguished once the patent issues. Post-issuance, the provisions of subsection 53(1) must be utilized with respect to allegations of misrepresentation.

Two earlier decisions of the Federal Court, Lundbeck Canada Inc. v. Ratiopharm Inc., 2009 FC 1102 Mactavish J at [298]-[352], and G.D. Searle & Co. v. Novopharm Ltd., 2007 FC 81 at [62]-[78] rev’d 2007 FCA 173 had held that abandonment under section 73 could be invoked post-grant. These cases were specifically overruled on this point: [151]. (Note that the FCA decision in G.D. Searle reversed Hughes J without comment on this point, and the FCA noted at [5] that its decision had been released subject to time constraints and had to be read accordingly.)

Post-Judgment Interest: Principles and Practice

Astrazeneca Canada Inc v Apotex Inc 2011 FC 663 Hughes J 

Hughes J’s very brief costs decision packs a great deal of significance into a single paragraph awarding compound post-judgment interest.

At common law the courts were reluctant to grant interest at all, much less compound interest, as being punitive. The prohibition on interest was legislatively reversed, but many jurisdictions at the same time expressly prohibited compound interest. So s 36(2) of the Federal Courts Act permits “reasonable” prejudgment interest, but s 36(4)(b) prohibits compound interest. The Federal Courts Act, again in common with many other jurisdictions, distinguishes between pre- and post-judgment interest, in that they are dealt with in separate sections (s 37 deals with post-judgment interest), and there is no express prohibition on compound post-judgment interest. This lack of prohibition did not imply that compound interest would normally be awarded, given the common law prohibition on compound interest. Consequently, compound interest was not traditionally awarded in patent cases.

“Final” means Final

Bartley v. Canada (Commissioner of Patents) 2011 FC 873 Hughes J 

The facts in Bartley are essentially the same as those in Belzberg v Canada (Commissioner of Patents), 2009 FC 657, with only one twist, and in Bartley Hughes J affirmed and applied Simpson J’s holding in Belzberg that a “Final Action” report must be final: all defects must be raised, not just a selection [71]. If the PAB and Commissioner find no merit in the defects raised in a Final Action report, the patentee is entitled to have the patent granted without further objections being raised. In addition, Bartley settles an important point regarding the time for seeking judicial review in the circumstances.

Issue Estoppel and Foreign Proceedings

Astrazeneca Canada Inc v Apotex Inc 2011 FC 862 Hughes J

Inconsistent results in litigation between the same parties over corresponding patents in different jurisdictions is embarrassing and the duplicative litigation is wasteful. While the results of litigation in a foreign jursidiction are not directly binding on Canadian courts, issue estoppel might in principle be invoked to promote comity and reduce wasteful litigation. While I am not aware of any decision actually applying issue estoppel based on foreign litigation to determine a point in a Canadian action, in Apotex Inc. v Wellcome Foundation Ltd. (1996), 68 C.P.R. (3d) 23 (FCTD) and Connaught Laboratories Ltd v. Medeva Pharma Ltd. (1999), 4 C.P.R. (4th) 508 (F.C.T.D.) Sharlow J. aff'd (2000), 4 C.P.R. (4th) 521 (F.C.A.), the Federal Court has refused to strike pleadings that argued issue estoppel based on foreign actions. However, such pleadings will not automatically be accepted. In Astrazeneca Canada Inc v Apotex Inc 2011 FC 862, Apotex pleaded that because the patentee Astrazeneca had elected not to raise certain claims of the US patent in US litigation, it was thereby precluded from asserting the equivalent claims in the corresponding Canadian patent in the Canadian litigation. (It should be noted that this was in response to Astrazeneca’s pleading that Apotex was bound by certain factual determinations in the US litigation: [6:Category 2.1].) Hughes J ordered these paragraphs struck.

The assertion that the patentee was bound not to assert claims that had not been asserted in a foreign proceeding was novel, but Hughes J’s reasoning was based on broader considerations. The principle underlying issue estoppel, which is a branch of res judicata, is to ensure finality by precluding re-litigation of the same issue. Accordingly, issue estoppel requires inter alia, that it must be the same issue that was decided in the other judicial proceedings: Angle v Minister of National Revenue, [1975] 2 S.C.R. 248 (S.C.C.). In patent law, it may be very difficult to determine whether the same issue was decided. This was pointed out in a decision relied on extensively by Hughes J, Johnson & Johnson Inc. v Boston Scientific Ltd., 2008 FC 552 at [260]-[268], in which Layden-Stevenson J refused to apply issue estoppel to settle a point in an infringement action. Even when the patents are based on the same priority document, the claims at issue may differ, and even if the claims are the same, claim construction is a matter of law to which res judicata cannot apply. Expert witnesses on foreign law would be required to establish whether the issue decided was the same. In short, invoking issue estoppel based on foreign actions is likely to be more trouble than it is worth. Hughes J emphasized at [7] that “litigation is costly and that unnecessary irrelevant or distracting matters should not be put in play simply because there is a possibility of relevance.” In the circumstances in which issue estoppel or res judicata is traditionally applied, it would normally reduce litigation cost by avoiding wastefully duplicative litigation of the same issue; in patent litigation it is more likely to increase litigation cost by requiring determination of whether the same issue had been determined in the foreign litigation. In Connaught, Sharlow J was aware of this problem, and responded by saying that “complexity by itself cannot justify striking pleadings that are worthy of the Court's attention.” In this decision, Hughes J has come down in favour of trying to place some limits on the cost of patent litigation, rather than exploring every issue of potential relevance.

Evergreening and Accounting of Profits

Harris v Glaxosmithkline Inc, 2010 ONSC 2326 affm’d 2010 ONCA 872 leave to appeal to SCC dismissed 14-Jul-11

If a brand pharmaceutical company obtains a stay under the NOC proceedings on the basis of a patent that is ultimately found to be not-infringed or invalid in those proceedings, the generic seeking the NOC is entitled to damages for the period that it was kept off the market. However, the generic is not entitled to an accounting of the brand’s profits in the Federal Court: 2009 FCA 187. Apart from the text of the NOC Regulations, a problem with the generic seeking those profits is that the profits were not made at the generic’s expense. As Lewison J said in Wake Forest University Health Sciences v Smith & Nephew [2009] EWHC 45 (Pat), at [19] “it is by no means clear to me that it would be just to transfer a profit made by the claimant [brand] to the enjoined defendant [generic]. If the claimant has made a profit which it would not have made but for the injunction, there may be other people to whom it would be more just that those profits should be returned, either other potential competitors with the defendant or customers who, as things turn out, may have been overcharged.” Harris v Glaxosmithkline Inc establishes that the customers who may have been overcharged cannot get those profits back from the brand pharmaceutical company. (There is still a question as to whether the generic may be able to get an accounting in a court of inherent jurisdiction on the basis of unjust enrichment: see my earlier post, noting that this route will also face the hurdle identified by Lewison J.)

GSK’s base patent for Paxil was for paroxetine hydrochloride in the anhydrate form. This patent expired in 1995 [ONSC 13]. GSK obtained various patents for hemihydrate paroxetine and listed them on the Patent Register against Paxil. Various generics were ultimately successful in obtaining NOC’s for paroxetine hydrochloride on the basis that they would be selling the anhydrate, and allegations based on invalidity or non-infringinement of the hemihydrate were not unjustified. Nonetheless, in consequence of the statutory stay flowing from the NOC proceedings, generic paroxetine was kept of the market for about four years [ONSC 7]. Harris v Glaxosmithkline Inc was a class action of Paxil (paroxetine) users seeking compensation from GSK for higher paroxetine prices during this four-year period. In other words, the plaintiff alleged that this was a classic case of “evergreening” and that GSK should be liable for the higher prices that resulted.

The ONSC dismissed the action on the basis that it was plain and obvious that the action could not succeed. The ONCA agreed, and leave to appeal to the SCC was dismissed last Thursday. The plaintiff had argued for liability based on conspiracy, abuse of process, and waiver of tort. The abuse of process argument was in effect that listing the hemihydrate patents was an abuse of the PM(NOC) Regulations. This argument was dismissed on the basis that the tort of abuse of process is not available to a person who is not party to the litigation in which the abuse is alleged to have occurred [ONCA 33], and, more fundamentally, using the NOC process in a perfectly regular manner cannot be said to be an abuse of the NOC process, even if the listed patents are ultimately not sufficient to prevent the NOC from issuing. The plaintiff’s “lynchpin” [ONSC 105] argument on this point was that the whole process was a “sham” – in effect, that it was obvious that the listing of the hemihydrate patents against Paxil was inappropriate, and that it was done only in order to trigger the statutory stay. Perell J at first instance considered the substance of the NOC litigation and concluded it was not a sham; the ONCA held that it was unnecessary to consider this argument [ONCA 56]. This implies that the intent of a brand in listing a patent on the Register is irrelevant; the safeguards against abuse of the NOC process lie in that process itself. The conspiracy claims were dismissed on the similar ground that an intent to maximize its own profits cannot sustain the tort of conspiracy to injure the plaintiff.

What is a “Scintilla” of Utility?

Eli Lilly & Co v Teva Canada Ltd / atomoxetine 2011 FCA 220 Evans JA: Noël, Dawson JJA aff’g Novopharm Ltd v Eli Lilly & Co 2010 FC 915 Barnes J

2,209,735 – atomoxetine – STRATTERA

The factual background to this decision and the sound prediction argument are discussed in my last post. The main issue, both at trial and on appeal, was whether the patent was invalid for lack of demonstrated utility. The accepted position in Canadian law is that “[w]here the specification does not promise a specific result, no particular level of utility is required; a ‘mere scintilla’ of utility will suffice. However, where the specification sets out an explicit ‘promise’, utility will be measured against that promise” 2010 FCA 197 [76]. In practice, the patent can always be construed as making some kind of promise, and utility therefore is almost invariably measured against that promise. In this case the patent was construed as promising that atomoxetine would be a clinically effective treatment for ADHD [29]. The problem for the patentee was that as of the filing date, the sole study supporting the claimed utility of atomoxetine for treating ADHD, the MGH Study, was small scale and preliminary, with significant methodological shortcomings. Barnes J held that it was not adequate to establish clinical efficacy. On appeal, Lilly argued that only a scintilla of utility is necessary [31], but the FCA affirmed the standard doctrine that the patentee will be held to the promise of the patent. Whether that standard has been met is largely a factual question, and the FCA held that it was open to Barnes J on the facts to conclude that it was not.

There is nothing legally novel in this. What is more interesting, in my view, is to ask what the result would have been had the patentee been held only to the “scintilla” standard. I have argued in a previous post that the false promise doctrine, which holds the patentee to the utility specified in the patent, should be abandoned because it means that the validity of a patent may depend on the particular wording of the disclosure rather than the substantive usefulness of what has been disclosed. This is a trap for the unwary drafter – so long as an invention has the minimum required utility, there is no need to promise more – so a patentee who speaks too glowingly of its invention may thereby invalidate what would otherwise be a good patent. On its face this problem appears to be illustrated by the atomoxetine decision; if only the patent description had avoided words like “effective” in favour of perhaps “useful,” the lower “scintilla” standard would have applied, rather than the higher “effectiveness” standard.

FCA Affirms that Factual Basis for Sound Prediction Must be Disclosed in the Patent

Eli Lilly & Co v Teva Canada Ltd / atomoxetine 2011 FCA 220 Evans JA: Noël, Dawson JJA affm’g Novopharm Ltd v Eli Lilly & Co 2010 FC 915 Barnes J 

2,209,735 – atomoxetine – STRATTERA

In the decision appealed from this in this case, Barnes J declared Eli Lilly’s patent for the use of atomoxetine in the treatment of ADHD to be invalid on the basis of lack of utility. Barnes J held that the results of the sole study conducted prior to the filing date (the “MGH Study”) “were promising but only preliminary” [113] and “interesting but inconclusive” [114], and were therefore inadequate to establish demonstrated utility based on the promise of the patent. He also held that the study could not be relied upon to support a sound prediction of utility because the study had not been referred to in the patent disclosure.

Lilly appealed, arguing that with respect to demonstrated utility, Barnes J had misconstrued the promise of the patent and had required too high a standard of proof of utility, and that with respect to sound prediction, he had erred in holding that the factual foundation of sound prediction must be disclosed in the patent [FCA 3].

On the sound prediction point, I have argued in a previous post that the requirement that the factual basis for sound prediction must be disclosed in the patent is conceptually unsound as there is no distinction in the Act between demonstrated utility and utility based on sound prediction, and that it is inconsistent with the Supreme Court decision in Wellcome / AZT 2002 SCC 77 and the cases on which the Supreme Court relied. With that said, the FCA jurisprudence is clear on this point. The FCA decision in this case affirms its own prior case law [47], and adds nothing of significance in terms of analysis of the prior cases or policy justification for the doctrine. It should be noted that in this case it is not clear whether the sound prediction would have helped the patentee; Barnes J did not consider whether the MGH Study would have supported sound prediction had it been disclosed.

I will discuss the demonstrated utility point in a subsequent post.

Is a Material Misstatement under Section 53 Fraud for the Purposes of Rule 399?

Pfizer Canada Inc. v Ratiopharm / amlodipine besylate (NOC) 2011 FCA 215 Létourneau JA: Dawson, Stratas JJA

Since I started this blog at the beginning of the year, there have been enough cases on the relationship between section 8 damages and patent validity that I have decided to add a new tag for that topic. The automatic stay available to the patentee under section 7(1) of the PM(NOC) Regulations is analogous to an automatic interlocutory injunction, and section 8 damages available to the generic are analogous to damages on the undertaking normally required of an applicant who obtains such an injunction. The difficulty arises because NOC proceedings and impeachment proceedings are entirely separate. Under the “no reach back” rule established in Apotex v Syntex / naproxen (NOC) 2010 FCA 155, the generic is not entitled to section 8 damages if it is unsuccessful in the NOC proceedings, even if the patent is ultimately held to be invalid in a subsequent infringement action. The generic will therefore have been wrongly excluded from the market under an invalid patent, and yet will have no remedy for the harm suffered as a result. In contrast, if the patentee had obtained an interlocutory injunction in an infringement action, damages on the undertaking would be available to the generic if it ultimately established the patent was invalid. (It would also seem to follow that if the patentee loses in the NOC proceedings, but prevails in the infringement action, the patentee will nonetheless be liable to the generic under section 8, though it would not have been liable on the undertaking on an interlocutory injunction. This point has not yet been established in litigation. For posts discussing the problem, click on the Section 8 and Patent Validity tag.)

The amlodipine besylate litigation exemplifies the issue. In 2006, Pfizer was ultimately successful in obtaining a prohibition order in the NOC proceedings – 2006 FCA 214 rev’g 2006 FC 220 – but the patent was declared invalid in subsequent infringement proceedings: 2010 FCA 204 aff'g 2009 FC 711. Ratiopharm would like section 8 damages, but under the “no reach back” rule, it is not entitled to them. In the motion that was the subject of the most recent decision in 2011 FCA 215, Ratiopharm sought to avoid the “no reach back” rule by applying to have the 2006 prohibition order set aside. Normally the NOC matter would be res judicata, notwithstanding the finding of invalidity in the infringement proceeding, so Ratiopharm applied under Rule 399(1)(a) and (b) of the Federal Court Rules to have the order of prohibition set aside on the basis that (a) the holding of invalidity in the infringement action was “a matter that arose or was discovered subsequent to the making of the order,” or (b) the order had been “obtained by fraud.”

Mootness on Appeal

Epicept Corporation v. Canada (Health) 2011 FCA 209 Stratas JA: Sharlow, Trudel JJA, dismissing for mootness 2010 FC 956 Near J

In the decision under appeal Near J had held that Epicept’s drug CEPLENE is not an “innovative drug” under the Data Protection Regulations. Epicept appealed, but while the appeal was pending, Epicept withdrew its new drug submission for the approval of CEPLENE. On a motion by the CGPA, the Court of Appeal dismissed the appeal for mootness.

The appeal was clearly moot, and the real question was whether the Court should exercise its discretion to hear a moot appeal [7].

The Incentive Effect of Patents in Pharmaceutical Research

Astrazeneca Canada Inc. v. Apotex Inc. / esomeprazole 2011 FC 505 Crampton J affm’d 2011 FCA 211 

The third part of the Cyanamid test for an interlocutory injunction requires the court to consider the balance of convenience, including the public interest, if relevant.

The patentee, AstraZeneca argued that the assessment of the balance of convenience “should take into account the harm to the public interest in patent rights and the promotion of innovation and drug discovery” [155] (and see also [65]). Crampton J agreed that this “may well be a legitimate consideration” [156, 65], but declined to give it weight on the basis that “in this particular case, this claim is nothing more than a bald assertion. AstraZeneca has provided no evidence whatsoever of any adverse impact that would result from a decision not to grant the requested injunction” [156]. He did note that “counsel would be well advised to provide evidentiary support for this type of submission in future cases” [65].

It is interesting that Crampton J declined to give weight to the incentive effect of patents without evidence on the point. It has long been established that the purpose of the Patent Act is to provide incentives for useful innovations by providing the inventor with a limited term monopoly for that which he has invented and disclosed: Consolboard Inc. v. MacMillan Bloedel (Sask.) Ltd., [1981] 1 S.C.R. 504 at 517; Whirlpool Corp. v. Camco Inc. 2000 SCC 67 at [42]. It might seem natural to presume that a granted patent achieves that goal. The role of the non-obviousness requirement in particular is to ensure that patents are granted only for those inventions “which would not be disclosed or devised but for the inducement of a patent” Graham v John Deere (1966) 383 U.S. 1 at 11. If a granted patent is presumed to be valid, and therefore presumed to be non-obvious, it would seem to follow that it should be presumed that the patent incentive was necessary – unless the court were willing to undertake an assessment of the merits, which Crampton J declined to do.

The issue of whether there should be a presumption should be of little consequence to pharmaceutical patentees. As Rothstein J stated for the Court in Sanofi 2008 SCC 61 at [64] “The patent system is intended to provide an economic encouragement for research and development. It is well known that this is particularly important in the field of pharmaceuticals and biotechnology.” While Rothstein J did not cite any authorities, the empirical evidence is entirely uniform in showing that patents are crucial to innovation in the pharmaceutical industry: see my review of the research in Part 3 of my article The Structure of the Law of Patentable Subject Matter, 23(2) IPJ 167 (2011) (draft here).

Irreparable Harm in Interlocutory Injunctions

Astrazeneca Canada Inc. v. Apotex Inc. / esomeprazole 2011 FC 505 Crampton J aff’d 2011 FCA 211 

On the second branch of the Cyanamid test, which requires the applicant to show irreparable harm, Crampton J’s decision was entirely consistent with Federal Court jurisprudence. I have criticized this jurisprudence at length in my article Interlocutory Injunctions and Irreparable Harm in the Federal Courts, 88(3) Can Bar Rev 515, and here I will simply outline some of the main points.

The Federal Court jurisprudence uses irreparable harm as a strict threshold. That is, if the applicant cannot show irreparable harm, the application will be dismissed without the need to consider the balance of convenience [154]. This is not consistent either with the traditional practice in Chancery, or with the general position in other Canadian jurisdictions, or with Cyanamid itself. Chancery practice is discussed in detail in my article. With respect to other Canadian jurisdictions Sharpe on Injunctions and Specific Performance para. 2.450 states that “attempts to make irreparable harm, and hence a condition precedent, and hence a threshold test, have been rejected.” In Cyanamid, which was itself a patent case, the main harm alleged by the patentee was the “[loss] of its chance of continuing to increase its share in the total market” ([1975 AC 396 at 409-10). The Federal Court jurisprudence requires the applicant to prove irreparable harm on the basis of evidence that is “clear and not speculative” [56], while in Cyanamid the interlocutory injunction was granted merely on the trial judge’s common sense inference that there would be loss of market share “[a]lthough there is not at present any evidence to that effect in this case” ([1974] FSR 312). The injunction granted by the House of Lords in Cyanamid would undoubtedly have been refused on current Federal Court jurisprudence.

The Role of the Merits in an Interlocutory Injunction

Astrazeneca Canada Inc. v. Apotex Inc. / esomeprazole 2011 FC 505 Crampton J aff’d 2011 FCA 211

Though I haven’t done a search, my impression is that it has been quite a while since I’ve seen an interlocutory injunction motion on a patent case out of the Federal Court. Perhaps patentees have more or less given up in light of the restrictive approach taken in the Federal Court of Appeal from about 1990. If so, there is nothing in this decision to change their minds. This is a typical case of a patentee pharmaceutical company seeking an interlocutory injunction to prevent generic entry pending an infringement action. The main twist – an important one in my view, though not in the view of Crampton J – is that AstraZeneca had been unable to obtain a order of prohibition in the related NOC proceedings. The result also is typical: the interlocutory injunction was refused. Crampton J’s opinion is entirely consistent with Federal Court precedent, and it was affirmed by the Court of Appeal on the basis that the decision was heavily fact based and therefore subject to a deferential standard of review. There is little new law in the decision. Nonetheless, in my view, the decision illustrates problems with the current approach to interlocutory injunctions, both in general and in the Federal Court.

There are three points of note: first is the role of an assessment of the merits in an interlocutory injunction; second is the stringency of the irreparable harm requirement in the Federal Courts; third is the view taken by Crampton J regarding the need to prove that patents encourage innovation in the pharmaceutical industry.

Will Microsoft v i4i Influence Canadian Law?

In its decision in Microsoft v i4i, released today, the USSC affirmed a strong presumption of patent validity, holding that an invalidity defence must be proven by “clear and convincing evidence.” The Canadian courts are very receptive to considering case-law from other jurisdictions as persuasive authority, but as Phelan J noted in Amazon.com 2010 FC 1011 “this must be done mindfully.” I suggest that the i4i decision is unlikely to be influential in Canadian law, for three reasons: the statute is different, the precedent is different, and the USSC expressly did not consider policy arguments.

In i4i the USSC noted that the US statute “includes no express articulation of the standard of proof,” so its holding did not turn on the text of the statute. The Court also refused to consider the policy arguments, on the basis that the case-law was too well established: “We find ourselves in no position to judge the comparative force of these policy arguments. For nearly 30 years, the Federal Circuit has interpreted §282 as we do today.” Thus the decision of the USSC in i4i was based entirely on affirmation of a consistent line of precedent in US law, which first as a matter of common law, and subsequently as a matter of interpretation of the statutory provision, which was understood as codifying the common law, has always required clear and convincing evidence to hold a patent invalid.

Compare this with the Canadian situation. The leading case is the decision of the FCA in Diversified Products Corp v Tye-Sil Corp (1991) 35 CPR(3d) 350 (FCA) in which the Court of Appeal held that the statutory presumption is only a prima facie presumption, which is to say that it will govern in the absence of any evidence, “but it can have no weight capable of being put in the balance against opposing evidence which is believed” (quoting Fox). Consequently, a challenge to the validity of a patent need only satisfy “the usual standard of balance of probabilities.” Prior to that decision, as the Court of Appeal explained, the preponderance of the cases applied, or at least articulated, a higher standard, but the cases were not consistent and the matter had been the subject of controversy. The standard set out in Tye-Sil has since been consistently followed in Canada. The only caveat is that in Wellcome / AZT 2002 SCC 77 at [43]-[44] the Supreme Court held that the appropriate “standard of review” of a granted patent on a question of mixed fact and law, such as validity challenge based on utility, is “reasonableness simpliciter.” This was a short discussion - two paragraphs - which had not been briefed by the parties; the Court failed to even cite Tye-Sil, the leading case. Since then, the Federal Court has refused to follow the Supreme Court on that point, with Gauthier J delivering a forceful explanation of where the Supreme Court went wrong. Of course a statement by the Supreme Court, even in passing, is strong authority in its own right. But the point is that there is not any consistent history of applying a high standard. The Supreme Court’s statement stands on its own merits, and not as affirmation of a consistent body of prior case-law. The decision of the USSC in i4i is entirely different in that respect.

The Canadian Act is also different from the US statute. The Canadian Act now provides that a granted patent shall be valid “in the absence of any evidence to the contrary.” Prior to the 1985 revisions it has similarly provided for “prima facie” validity. Both of these are consistent with a weak presumption. The US Act says simply that a patent “shall be presumed valid.” Even if the i4i decision turned on the statute, which it did not, these statutory differences are significant enough to reduce the significance of US law.

Further, while the USSC did not expressly consider policy issues, it indirectly acknowledged the force of the argument in favour of a weak presumption, at least in the context where the evidence before the court was not before the examiner. The USSC held it was bound by precedent to apply the same presumption of validity even in that context, but the Court went on to say “if the PTO did not have all material facts before it, its considered judgment may lose significant force. And, concomitantly, the challenger’s burden to persuade the jury of its invalidity defense.” It is evidently illogical to grant deference to an examiner who did not have all the facts. As Gonthier J explained, this is why the Supreme Court was wrong to consider a validity attack on a challenged patent as if it were an application for judicial review of an administrative body that had heard a full argument on the facts. This is a very strong point, and despite the US precedent, it persuaded the USSC to create a loophole in the nominally strong presumption in such a case.

Finally, it might be said that the fact of a consistent body of case-law in the US should be persuasive in itself, as reflecting the cumulative wisdom of the US courts. But against that, we should look to the cumulative wisdom of the English courts, where the standard of review is the same as that articulated in Tye-Sil.

While the strength of the presumption of validity in Canada is currently something of an open question in consequence of the SCC’s two paragraphs in the AZT decision, but I suggest that despite the high authority of the USSC, the basis for its decision in i4i decision means that that case should not and will not affect the resolution of this issue in Canadian law.

The CGPA Does Not Have Standing to Challenge a Listing on the Register of Innovative Drugs

Canadian Generic Pharmaceutical Association v Canada (Health) 2011 FC 465 de Montigny J aff’g 2010 FC 1211 (Lafrenière, Prothonotary)

The Canadian Generic Pharmaceutical Association (CGPA), sought to challenge the listing of a particular drug on the Register of Innovative Drugs by writing to the Minister requesting that the drug be removed from the Register. The Minister refused on substantive grounds. The CGPA sought judicial review. Lafrenière P struck the application for judicial review on the basis that the CGPA does not have standing, and de Montigny J affirmed.

de Montigny J held that the CGPA does not have standing under s 18.1 of the Federal Courts Act as a person “directly affected,” because it has never filed a new drug submission and does not intend to do so [42]; by way of analogy, under the PM(NOC) Regulations, a manufacturer does not have standing to challenge a listing on the Patent Register unless it has filed an ANDS [44].

On the question of public interest standing, de Montigny J agreed that there was a serious issue, but held that the CGPA failed on both the second and third prongs. On the second prong he held that public interest standing is intended to be used to challenge constitutional validity or general exercise of administrative authority, and not a discrete decision [60]-[61]. This distinguishes 2007 FCA 375 aff’g 2007 FC 154, which refused to strike the CGPA’s challenge to the vires of the data protection Regulations on the basis of standing. de Montigny J is an expert in this area, and his decision was thorough and well reasoned.

de Montigny J held that the CGPA also failed the third prong, which requires there is no other reasonable and effective way to bring the issue before the courts. In so holding de Montigny J usefully clarified that an individual manufacturer can challenge a listing, perhaps “merely through persuasive evidence of a genuine intention to file a drug submission” [68], or by filing an ANDS. On the latter point in particular, “it is clear from the procedure outlined above in the Guidance Document on Data Protection that it is not a criminal offence for a generic drug manufacturer to file an abbreviated new drug submission during the pendency of the data protection period” [71].

Thus the decision that the CGPA lacks standing to challenge an individual listing appears sound in law. With that said, the policy arguments advanced by the CGPA are interesting. The CGPA argued in effect that there is a collective action problem in challenging a listing. It is expensive to challenge a listing, but if the challenge is successful, all generics, not just the one that incurred the cost, will benefit. It is possible that no individual generic would find it worthwhile to challenge the listing; see generally [14]. There is a collective action problem in principle, though a similar collective action problem also arises under the PM(NOC) Regulations or indeed in a validity challenge in an infringement action. This does not prevent such challenges; presumably the generic bringing the challenge relies on a lead-time advantage to recoup its costs. (But see Pfizer Canada Inc. v Novopharm Ltd. / pregabalin (NOC), 2010 FCA 258 (Evans JA) aff’g 2010 FC 668 (Crampton J) aff’g 2010 FC 409, Milczynski Pr in which Novopharm sought to prevent free-riding off its NOA – in effect the generic was seeking data protection for the information contained in its NOA.) Nonetheless, even though the collective action problem may not preclude listing challenges, this decision, sound though it seems on current law, goes against the nascent trend of allowing collective challenges to monopoly rights, such as the Peer-to-Patent program.

On the other hand, the standing problem has another side to it. The requirement that a party must be directly affected serves to ensure that the party bringing the challenge has the motivation to present the case fully. The party who must respond should not have to endure multiple challenges from various parties with tangential interest and partial arguments. Of course the CGPA is not simply an officious inter-meddler, but on the other hand the innovator companies already face multiple attacks on their rights in a drug, first in NOC proceedings and then in infringement proceedings. The CGPA argued that denying it standing to challenge a listing would result in redundant litigation, since each manufacturer would be required to bring its own application for judicial review [66]. This would be far from the only redundant litigation in the pharmaceutical area. No doubt the process could be streamlined, but ideally this should be part of a holistic assessment.

This is not to say that there should not be a mechanism to allow some form of collective challenge to the listing, but it is just one part of a large problem of the multiplicity of actions and arises particularly in the pharmaceutical context.

No New Patent Cases

I haven't posted in almost two weeks, but that is simply because there haven't been any patent decisions released since Pfizer Canada Inc. v Mylan Pharmaceuticals ULC / donepezil (NOC) 2011 FC 547. Posts will resume as soon as a new decision comes out.

The promise of the patent: “It’s a strange word to me. . .”

Pfizer Canada Inc. v Mylan Pharmaceuticals ULC / donepezil (NOC) 2011 FC 547 Hughes J

The interesting issue raised by this case is the conflict between two views of patent construction. The English Court of Appeal has recently said that “[t]he task for the court is to determine what the person skilled in the art would have understood the patentee to have been using the language of the claim to mean” (Virgin Atlantic [2009] EWCA Civ 1062 at [5]). In contrast, the Federal Court of Appeal has equally recently said that “[t]he construction of a patent is a question of law to be determined by the Court, with the assistance of persons of ordinary skill in the art to which the invention relates” (Bridgeview Manufacturing 2010 FCA 188 at [9]). Both of these statements are supported by ample authority, and taken in isolation either might seem anodyne. Yet in practice there is a serious unresolved tension. On the first view, the construction of the patent is a matter of fact, and the meaning of any term or passage must be established by evidence of expert witnesses. On the second approach, construction of the patent is a mixed question of fact and law, and legal arguments and principles are needed to supplement the expert evidence. In the Pfizer v Mylan / donepezil Hughes J comes down firmly in the latter camp. The case illustrates this wisdom of that position. The practical implication, it may be hoped, is that it may no longer be necessary to advance legal argument via expert witnesses.

Minister has On-Going Duty to Maintain Innovative Drug Register / Participation in SAP Does Not Disqualify from "Innovative Drug" Status

Teva Canada Ltd v Canada (Health) 2011 FC 507 Campbell J

ELOXATIN had been sold by Sanofi from 1999 to 2005 under the “Special Access Program” (SAP) provided for in C.08.010(1) of the Food and Drug Regulations. In 2007 Sanofi received a NOC for ELOXATIN on the basis of an NDS, and ELOXATIN was then listed on the Innovative Drug Register. Consequently, it was eligible for data protection for an eight and a half year term running from the 2007 issuance of the NOC. Teva challenged this listing in 2010. The case raised a procedural point and substantive point.

The procedural point arose because Teva did not challenge the listing in 2007, but in 2010 it requested that ELOXATIN be deleted from the Innovative Drug Register on the basis that it contained a medicinal ingredient that had been “previously approved” and so did not qualify as an “innovative drug” under the definition in C08.004.1(1). The Minister refused to delete it, and notified Teva by letter.

Sanofi argued that Teva could only challenge the listing decision at the time of the original decision, at least in the absence of any new information. The FC agreed with Teva and the Minister, that the Minister has an ongoing duty to maintain the register, and so a decision regarding listing can be made at any time. The Minister accepted that her decision was subject to judicial review, but there was a dispute as to whether Teva had standing. The FC held [18] that Teva did have standing, on the basis that the listing on the Register prevented it from filing an ANDS. The decision in CGPA v Minister of Health and GlaxoSmithKline Inc 2011 FC 465 holding that the Canadian Generic Pharmaceutical Association did not have standing to challenge a listing decision, was distinguished at [34] on the basis that the CGPA is an association which is incapable of filing an ANDS. (While Campbell J referred to this decision as having been released, it is not yet available on the Federal Court website.)

On the substantive point, Teva argued that the Minister’s course of action in allowing extensive use of ELOXATIN under the SAP showed that she must have been satisfied of the safety and efficacy [24]. The FCA rejected this, agreeing with the Minister that approval means market authorization, including safety and efficacy approval, on the basis of an NDS or ANDS under C.08.004. The functional rationale is that an SAP does not require the same data that the normal approval does, and it is the data submitted for the NDS that is the subject of data protection. Teva argued that the data which was the basis for the NDS arose from Sanofi’s participation in the SAP, and so was disclosed prior to the NOC being issued. However, even if this is true on the facts of this case, it is not necessarily true in general. The meaning of “previously approved” in the definition of an innovative drug cannot turn on the extent to which the particular information relied on in the NDS had been previously disclosed.

Exact Matching Required in PM(NOC) Listing of Dosage Claims

Purdue Pharma v Canada (Attorney General) / TARGIN 2011 FCA 132 Layden-Stevenson JA: Blais CJ, Stratas JA aff’g 2010 FC 738 Crampton J

As described in the previous post, Purdue Pharma sought to list 2,098,738 against TARGIN. TARGIN is a controlled release combination of two active ingredients, oxycodone and naloxone. The ‘738 patent claims a controlled release oxycodone formulation “comprising” oxycodone in a matrix. None of the claims expressly mention naloxone. Yesterday's post critiqued the FCA’s suggestion that the ‘738 patent was restricted to drugs containing only oxycodone, so that TARGIN could not infringe. If TARGIN could not infringe, the ‘738 patent would not be eligible for listing. However, even if TARGIN might fall within the scope of the ‘738 patent, it does not follow that the ‘738 patent can be listed. Since the 2006 amendments it is clear that list eligibility and infringement do not exactly coincide: it is not true that any patent that would be infringed by production of a particular drug is therefore eligible for listing against that drug (RIAS to SOR/2006-242 at 1512). Even if TARGIN potentially infringes, listing eligibility is a distinct question. This is the issue of “product specificity.” Is the match between the product and the patent sufficiently close?