No Contributory Infringement Without “But For” Causation

Apotex Inc v Nycomed Canada Inc / pantropazole 2012 FCA 195 Noël JA: Evans, Sharlow JJA aff’g 2011 FC 1441 Simpson J (blogged here).

Nycomed’s ‘748 patent claims a combination of pantoprazole with a heliobacter inhibiting anti-microbial agent. Apotex and Novopharm sell generic pantoprazole. Since the ‘748 patent does not claim pantoprazole itself, Nycomed sought to allege that the generics’ sale of pantoprazole constitutes contributory infringement. The theory is that pharmacists and physicians who dispense or prescribe pantoprazole and an anti-microbial agent are direct infringers, and the generics have “contributed to the infringing activities of these third parties through its product monograph, website and its marketing strategies to physicians and pharmacists” [FC 2].

The factual problem for Nycomed is that the combination of an antibiotic with a proton pump inhibitor (PPI), such as pantoprazole, is now the “gold standard” for the treatment of ulcers caused by H pylori (see 2006 FC 1411 at [30]), so it is very likely that substantial infringement would occur regardless of the generics’ marketing. Nycomed therefore sought to allege that the generics were liable for contributory infringement “distinct from the ‘but for’ allegation of inducement” [FC 2].

The legal problem with this claim is that contributory infringement is not recognized as such in Canadian law. As the FCA stated in Beloit Canada Ltee/Ltd et al v Valmet Oy (1988) 20 CPR(3d) 1 (FCA) (citations omitted):

Moreover, it is well established that there is no infringement of a patent in selling an article which does not in itself infringe the patent even when the vendor knows that the purchaser buys the article for the purpose of using it in the infringement of the patent. There seems to be only two exceptions to that rule, namely, that there is infringement:

(a) if the vendor, alone or in association with another person, sells all the components of the invention to a purchaser in order that they be assembled by him; and

(b) if the vendor, knowingly and for his own ends and benefit, induces or procures the purchaser to infringe the patent.

The second branch, inducement, is defined by the following three part test, set out most recently in Corlac v Weatherford 2011 FCA 228 at [162]:

First, the act of infringement must have been completed by the direct infringer.

Second, the completion of the acts of infringement must be influenced by the acts of the alleged inducer to the point that, without the influence, direct infringement would not take place.

Third, the influence must knowingly be exercised by the inducer, that is, the inducer knows that this influence will result in the completion of the act of infringement.

The second part amounts to a requirement that the direct infringement would not have taken place “but for” the acts of the alleged inducer.

Consequently, Simpson J held that Nycomed could not amend its claim to allege contributory inducement distinct from the “but for” allegation of inducement. Nycomed argued that the SCC decision in Monsanto v Schmeiser, 2004 SCC 34 had changed the law. Simpson J disagreed, and the FCA affirmed, saying “we adopt the reasoning set out at paragraph 27 of her reasons for holding that the decision of the Supreme Court in Monsanto Canada Inc. v. Schmeiser, 2004 SCC 34, is not indicative of an intention to depart from the existing precedents and to recognize 'contributory infringement' as a cause of action under the Canadian law.” My own view is also that Simpson J’s interpretation of Schmeiser was entirely correct.

There is nonetheless a problem in this kind of situation, at least in principle. Assume that the physicians are directly infringing, as alleged. Suppose that most would have infringed in any event, but in a substantial minority of cases, say 40%, the generics were the “but for” cause of the direct infringement. In that case Nycomed would not be able to establish “but for” causation for physicians as a class, even though the generics marketing efforts were the “but for” cause of a substantial loss.

This is exactly the problem of mass torts, which was addressed at common law by permitting liability based on “material contribution” rather than but for causation: see McGhee v National Coal Board [1972] 3 All ER 1008 (HL). This solution is very unsatisfactory, as it raises the opposite problem, that the defendant might be liable for all the loss, even though it was only the “but for” cause of a part. Material contribution is consequently disfavoured: see, most recently, Clements v. Clements, 2012 SCC 32. In refusing to relax the causation requirement for contributory infringement to something approaching material contribution, the FCA holding in this case is consistent with this general trend. The problem is solved more satisfactorily by class actions, in which the defendant can be made liable for only the proportion of the harm that it actually caused. I am not suggesting that a class action would be appropriate in this case. Class actions allow a class of plaintiffs to sue a single defendant for what might be called “contributory” causation, rather than allowing a single plaintiff to sue a class of defendants, and in any event, Nycomed wants to sue the generics, not the doctors. The point is simply that there is a real problem in principle which is not satisfactorily addressed by “but for” causation.

At another level, the problem is that the only practical means of enforcing the patent at issue in this case, or a use patent, as was at issue in Abbott / lansoprazole (NOC) 2006 FC 1411 aff’d 2007 FCA 251, is by an action against the generic, and yet the generic is entitled to sell the individual compound. I can’t help but think that there must be a better way of sorting this out than disputing over whether 40% or 60% of doctors would be influenced by the product monograph, but I have to admit that I can’t think of what that better way might be.

Can Comity Rationalize NOC Litigation?

Allergen Inc v Apotex Inc / COMBIGAN (NOC) 2012 FC 767 Hughes J

In Allergen Inc v Apotex Inc / combigan (NOC) Hughes J faced an NOC proceeding involving the same product and the same patent, but a different generic, as was addressed by Crampton J in Allergan Inc v Sandoz Canada Inc / combigan (NOC) 2011 FC 1316 (blogged here and here). Crampton J held that Sandoz’s allegation that Allergan’s 764 patent was invalid for obviousness was not justified. In contrast, Hughes J concluded that Apotex’s allegation that the patent was invalid for obviousness was justified. Hughes J nonetheless granted an order of prohibition, citing the need for comity. He also expressed concern that “that this Court is overwhelmed at times with NOC Regulation proceedings,” [70] and that it is necessary for the FCA to give instruction on the question of “how, in an NOC context, previous decisions of a Court on the same issues respecting the same patent, should be considered” [193]. He concluded that “only practical way to get the matter before the Court of Appeal is for me to grant the Order for prohibition in the likely expectation that Apotex will appeal” [194].

Refusal of Joinder Affirmed

Janssen Inc v Teva Canada Ltd 2012 FCA 137 Pelletier JA: Sharlow, Stratas JJA

In brief reasons from the bench, Pelletier JA affirmed the order of Hughes J in 2011 FC 1480, blogged here, dismissing a motion for the joinder of parties.

No Section 8 Recovery of Losses Incurred Outside Compensable Period

Teva Canada Ltd v Nycomed Canada Inc 2012 FCA 129 Evans JA:Dawson, Stratas JJA

In a brief decision upholding an order to strike portions of Teva’s statement of claim, the FCA has reaffirmed that in a claim for damages under section 8 of the NOC Regulations, losses incurred by a generic after the end of the compensable period are not recoverable, even if the losses were caused by the statutory stay. The rule was established in Merck Frosst Canada Ltd v Apotex Inc / alendronate (NOC) 2009 FCA 187 (old Regulations) and Teva Canada Ltd v Sanofi-Aventis Canada Inc / ramipril (NOC) 2011 FCA 149 (new Regulations, blogged here). This brief decision adds nothing, except to say that Sharlow JA’s dissent in the ramipril decision will not cause the FCA to reconsider: “Teva's remedy is to apply again for leave to appeal to the Supreme of Court of Canada where Justice Sharlow's dissent can be considered again, and not to re-litigate in the Federal Court and in this Court a matter that has already been decided” [11].

Is the Essentiality of a Claim Element a Question of Fact?

Hollick Solar Systems Ltd v Matrix Energy Inc 2012 FCA 174 Létourneau JA: Blais CJ, Pelletier JA aff’g 2011 FC 1213 Scott J (blogged here)

Hollick brought an action alleging that Matrix infringed its patent in a solar air heating system. Matrix defended on the basis that its system did not infringe, as the patent specified that the heated air is removed into the building through a plenum at “the top” of the panels, while the defendant’s device placed the air intake at the bottom of the panel. Since a patent may be infringed despite a substitution of a non-essential element of the invention (Free World Trust 2000 SCC 66 [55]), the question was whether the location of the air intake at the top of the panel was an essential element. Scott J’s opinion is one of the very few decisions to actually apply the three-step Improver test for essentiality that was approved in Free World Trust at [55]-[56]. The first step in that test is to ask whether the “variant” – the defendant’s device – has “a material effect on the way the invention works.” But what is meant by “the invention”? The inventive concept, or the invention as claimed? This question was raised directly on the facts (though it was not addressed specifically in the decision), as it appears that the defendant’s system was less efficient, and the placement of the intake at the bottom was intended to avoid the claims. Scott J at trial held that it was essential, and therefore the defendant’s system did not infringe, as the placement had a material effect on the way the invention worked: “The criteria is not whether the variant improves the performance of the invention but rather does it have a significant effect on how the device functions, be it positive or negative” [59]. Because Scott J considered only the claims, and not the inventive concept in coming to this conclusion, it is implicit that he took “the invention” in the Improver test to mean the invention as claimed.

The only question dealt with on appeal was whether Scott J erred in holding that the placement of the intake was an essential element. The FCA affirmed, noting that the determination of whether there was a material effect depended on the testimony of expert witnesses, and “[w]e are in effect asked to second-guess the judge on his appreciation of expert evidence on factual issues and issues of credibility, and then substitute our own appreciation” [17]. The FCA stated that it was not persuaded that Scott J had made an error of law or an overriding and palpable error on a question of fact or mixed law and fact.

This holding has two interesting implications. First, it indirectly affirms that “the invention” in the Improver test means the invention as claimed, not the inventive concept. However, it is not particularly strong authority on this point, as the question of the correct interpretation of the Improver questions point was not raised specifically either at trial or on appeal. As I noted in my post on Scott J’s decision, my own view is that the better interpretation of the Improver questions is that “the invention” means the inventive concept. With that said, the answer is certainly not easy to extract from the “mangle” of the Improver decision.

Second, the standard of review applied by the FCA implies that the question of whether an element is material is a question of fact, or at least mixed fact and law, and is therefore entitled to deference. Does this also mean that the question of whether an element is essential is a question of fact? Are the three different questions in the Improver test to be assessed on different standards? This question is not easy to answer, given that the Improver test is not consistently used. The FCA’s point that evaluation of technical evidence was required is certainly compelling on the facts in Hollick, but its approach may be contrasted with that taken by the FCA in Easton Sports Canada Inc. v Bauer Hockey Corp 2011 FCA 83, (blogged here). In Bauer the FCA affirmed the trial decision that the element was essential only after a detailed consideration of the evidence, and rather than affirming on the basis of lack of error, the FCA held affirmatively that the element in question “is an essential feature of the claim” [54]. With that said, it is not clear whether this reflects any difference in principle, or simply reflects differences in the way the cases were argued.

No New Cases for the Week of 10 June

No new patent / NOC / data protection cases were released by the Federal Courts in the week of 10 June.

Certification Not Required to Establish Start Date for Section 8 Compensable Period

Apotex Inc v. Merck & Co., Inc. / lovastatin (NOC) 2012 FC 620 Snider J on remand from 2011 FCA 364 (blogged here)

Section 8(1)(a) of the NOC Regulations provides that the presumptive start date for the compensable period under s 8 is “the date, as certified by the Minister, on which a notice of compliance would have been issued in the absence of these Regulations.” In this case, there was no evidence that the Minister had certified a date. Snider J held that despite the absence of a certification, the appropriate start date was the date on which, on the facts, Apotex would have received its NOC:

[15] Merck is correct that there is no Ministerial “certification” of May 25, 1996 as contemplated by s. 8(1)(a). However, I am satisfied that, but for the Regulations, Apotex would have received its NOC for Apo-lovastatin no later than May 25, 1996.

Thus certification by the Minister is not a prerequisite to recovery of s 8 damages; the main consideration is when the generic would have received its NOC, but for the Regulations. In this case it was uncontroversial that the “patent hold date” was May 25, 1996 [14]. This conclusion is somewhat difficult to reconcile with the text of the Regulations, as even the discretion provided for in s 8(1)(a)(ii) refers to “the certified date.” However, the evident purpose of the Regulations is to permit recovery from the patent hold date, and it is reasonable to interpret the certification date as being a matter of evidence rather than substance. The 1998 amendments to the Regulations remedied many drafting problems in the notoriously obscure 1993 version, but it not surprising that more drafting issues will arise as s 8 cases are fully litigated.

Resolution on Section 8 Claims re Valid Patents

Apotex Inc v. Merck & Co., Inc. / lovastatin (NOC) 2012 FC 620 Snider J on remand from 2011 FCA 364 (blogged here)

What happens if a generic is successful in NOC proceedings, but unsuccessful in a subsequent infringement action? Can the generic claim s 8 damages for being kept out of the market by the statutory stay, on the principle that the NOC proceedings and the infringement proceedings are independent? Or is the generic barred from claiming s 8 damages, on the principle that it would have been infringing a valid patent by entering the market? We appear to finally have resolution on this question as Snider J’s lovastatin decision and Hughes J’s omeprazole decision, blogged here, give consistent answers to this question.

Constructing the “But For” World in Section 8 Damages

Teva Canada Ltd v Sanofi-Aventis Canada Inc / ramipril (s 8) 2012 FC 552 Snider J
Apotex Inc v Sanofi-Aventis Canada Inc / ramipril (s 8) 2012 FC 553 Snider J

Apart from the question of the compensable period, Teva / ramipril (s 8) and Apotex / ramipril (s 8) (discussed here and here) raised similar legal issues, and indeed similar factual issues, regarding the assessment of damages, as both cases turned on the construction of the hypothetical “but for” market for ramipril that would have obtained had the prohibition order not been granted. Common legal questions regarding the burden of proof, whether the generics could recover for lost off-label sales, and whether lost business value is recoverable, were also raised. Snider J’s analysis of the legal questions is the same in both cases, and the relevant discussion is often identical save to references to Teva or Apotex. For convenience, in this post I will cite paragraphs to the Teva decision, and refer Teva as the generic, except where there is a relevant difference, but it should be recognized that the same analysis is also provided in the Apotex decision.

Snider J assessed s 8 damages on the basis of the generally applicable principle of “but for” causation, which requires a comparison between the actual state of affairs and the court’s best assessment of what would have happened in the hypothetical world had the statutory stay not been triggered [5]. Generally, Snider J constructed the hypothetical world almost entirely as a matter of determining what would in fact have happened, without regard to various arguments that particular consequences should be ignored for policy purposes.

More Debate on the Compensable Period under Section 8

Apotex Inc v Sanofi-Aventis Canada Inc / ramipril (s 8) 2012 FC 553 Snider J

Yesterday’s post discussed the question of the start date of the compensable period for a s 8 claim in Teva / raimpril (s 8). Today’s post discusses the parallel question in Apotex / ramipril (s 8), in which both the start date and the end date were in dispute. Note that of the four dates to be determined in the two cases, only the end date in Teva was uncontroversial. Nor were any of the disputes easy to resolve; all raised significant legal questions relating interpretation of the Regulations. While the facts of both Teva / ramipril (s 8) and Apotex / ramipril (s 8) were unusual in certain respects, NOC litigation is very complex, and no doubt many cases are unusual in one way or another. That the first two cases to arrive at an assessment of s 8 damages have raised difficult issues of interpretation suggests that future litigation will continue to reveal uncertainty in the application of s 8 of the NOC Regulations. This is not to impugn the drafting; anticipating the future fact patterns is no easier for legislative drafters than it is for patent drafters.

Compensation Period in S 8 Action Cannot Begin Prior to Date of Statutory Stay

Teva Canada Ltd v Sanofi-Aventis Canada Inc / ramipril (s 8) 2012 FC 552 Snider J

I believe that the companion cases of Teva / ramipril (s 8) and Apotex / ramipril (s 8) 2012 FC 553 are the first s 8 cases to go all the way to the assessment of damages. Snider J's decisions establish a number of important points concerning the start date for the compensable period, the nature of the “but for” scenario which forms the basis for assessing damages, and the nature of the recoverable damages. Overall, Snider J’s approach can be summed up in one sentence: “I am being asked to assess damages as though no prohibition application had been brought.” [183]. That is, Snider J assessed s 8 damages on the basis of the generally applicable principle of “but for” causation, which requires a comparison between the actual state of affairs and the court’s best assessment of what would have happened in the hypothetical world had the “wrong” not occurred. The “wrong” in this context is the statutory stay triggered by the prohibition application; it is not Teva having been kept out of the market by the operation of the NOC Regulations as a whole. (I put “wrong” in quotations as there is no legal wrong in Sanofi having brought the prohibition application; I use the term to emphasize the parallel with the ordinary principles of but for causation of damages in tort law.) From that causal trigger, Snider J constructed the hypothetical world almost entirely as a matter of determining what would in fact have happened, without regard to various arguments that particular consequences should be ignored for policy purposes. The qualification to that strictly factual approach to constructing the “but for” scenario is that Snider J applied the rule, established in Merck Frosst Canada Ltd v Apotex Inc / alendronate (NOC) 2009 FCA 187, that losses caused by the stay, but incurred outside the compensable period, are not recoverable as a matter of law.

This post deals with the question of the start date of the compensable period (referred to by Snider J as the "Relevant Period) in Teva / ramipril (s 8). The parties agreed that the end date for the compensation period is 27 April 2007, when the application was dismissed. The NOC Regulations s 8(1)(b) do not allow for any discretion in this respect. But the parties disputed the appropriate start date. Section 8(1)(a) of the NOC Regulations provides that the start date for the compensation period is presumptively the date “on which a notice of compliance would have been issued in the absence of these Regulations,” unless the court concludes that another date is more appropriate.

Snider J Also Rejects Validity Attacks on Section 8

Teva v Sanofi; Apotex v Sanofi / ramipril (NOC) 2012 FC 551 Snider J

Validity attacks on s 8 of the NOC Regulations were raised by Sanofi in two separate actions before Snider J, in which Teva and Apotex are seeking to recover s 8 damages. The same arguments were raised before Hughes J by AstraZeneca in similar circumstances. By agreement of the parties, the validity arguments in all three cases were argued before Snider J and Hughes J together. As described in my previous post, Hughes J rejected these arguments. In her decision dealing with this point alone, Snider J has done the same. Snider J held that most of the validity attacks raised by Sanofi did not arise on the facts of the particular disputes. On the question of whether s 8 complies with TRIPS and NAFTA, Snider J adopted the reasons of Hughes J as her own [55].

Futile Attacks on Section 8 of the NOC Regulations

Apotex Inc v AstraZeneca Canada Inc / omeprazole (NOC) 2012 FC 559 Hughes J

In Apotex v AstraZeneca / omeprazole AstraZeneca attacked the validity of s 8 of the NOC Regulations on various grounds, which were all rejected by Hughes J. While the objections were framed phrased a number of ways, AstraZeneca had two basic complaints.

First, AstraZeneca in effect complained that it is being punished simply for invoking section 6 of the NOC regulations: [115]. The essential answer to this is that section 6 and section 8 are a package, and if AstraZeneca does not want to expose itself to section 8 liability, it should not seek to a stay: “In making a choice to list a patent and a choice to institute prohibition proceedings, that party must be mindful that, just as if it had given an undertaking in order to secure an  interlocutory injunction, it must make good the losses suffered by the other party should it fail to secure the prohibition Order” [58]. There is nothing unfair about this, since the automatic stay, like an interlocutory injunction, being decided on the basis of limited information, may wrongly interfere with the rights of the other party. The quid pro quo for the stay is that the patentee will be liable for that harm in the case the stay is “wrongly” triggered. It is worth remembering that the greater availability of interlocutory injunctions formalized in American Cyanamid emerged as a result of the practice of requiring an undertaking from the applicant to compensate the defendant if the defendant’s position was ultimately vindicated. When the applicant was not liable to compensate the defendant, the courts would require a much stronger showing on the merits before granting an interlocutory injunction.

The second basic complaint was that liability under s 8 strikes the wrong “balance” [94], [97]. But as Hughes J pointed out, “[i]t is for Parliament to provide for the appropriate weighing or balancing of interests in enacting the Patent Act, and for the Governor-in-Council to do likewise in promulgating the NOC Regulations. There is no independent ground for arguing that section 8 of the NOC Regulations is invalid, simply because it was not “balanced” in the view of one of the interested parties” [99].

Award under NOC Section 8 to Be Considered in Damages in Subsequent Infringement Action

Apotex Inc v AstraZeneca Canada Inc / omeprazole (NOC) 2012 FC 559 Hughes J

The automatic stay available to the patentee under s 7(1) of the NOC Regulations is analogous to an automatic interlocutory injunction, and s 8 damages available to the generic are analogous to damages on the undertaking normally required of an applicant who obtains such an injunction: 2008 FC 1185 [54]. One important difference is that while an interlocutory injunction is brought as part of the infringement action, NOC proceedings and an infringement action are entirely separate. This gives rise to a problem of coordinating remedies if the final decision is inconsistent with the “interlocutory” stage. It is now well-established that if the generic is unsuccessful in the NOC proceedings, it cannot claim damages under s 8 if the patent is subsequently held to be invalid (Apotex v Syntex / naproxen (NOC) 2010 FCA 155). This is even though a defendant would have been able to recover such losses on the undertaking if the NOC system did not exist, and an interlocutory injunction, rather than an automatic stay, had been granted to patentee.

This decision of Hughes J is an important development in addressing the converse problem: is the generic entitled to s 8 damages even if the patent is later held to be valid and infringed by the same generic in an infringement action? If an interlocutory injunction is granted, the defendant is entitled to damages on the undertaking only if it is subsequently successful in the action itself. The separation of the NOC proceeding from the infringement action implies that in contrast, a patentee will be liable to a generic which is successful in the NOC proceedings, even if the patent is subsequently held to be valid and infringed. The difficulty with this result is that the generic would be entitled to damages for having been kept out of a market which it had no right to enter, as a holding in an NOC proceeding does not have in rem effect.

Equitable Election Does Not Preclude a Section 8 Claim after Amalgamation

Teva Canada Limited v. Wyeth LLC, 2012 FCA 141 Sharlow JA: Dawson, Stratas JJA rev’g 2011 FC 1169 Hughes J

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. Then, after Novopharm changed its name to Teva, Teva and Ratiopharm amalgamated. Teva is seeking to continue Ratiopharm’s section 8 claim against Wyeth, on the basis of the rule that an existing cause of action is unaffected by amalgamation.

In the decision under appeal, Hughes J held that in the circumstances the doctrine of equitable election precluded Teva from continuing the section 8 action. The FCA has now reversed, pointing out that Novopharm’s request that Wyeth institute proceedings against Ratiopharm, could not affect Ratiopharm’s right to section 8 damages [36]. In my view, this reasoning is sound. Neither Ratiopharm nor Novopharm ever elected between two inconsistent courses of action; any apparent inconsistency arose only subsequently, as a result of the amalgation. As I noted in my post on the decision under appeal, the result is not unfair to Wyeth, which is exposed to the same liability that it would have faced if Novopharm and Ratiopharm had not merged. There is no reason why that merger should confer a windfall on Wyeth.

A second question, not addressed by Hughes J given his decision on equitable election, was whether Wyeth was entitled to an order to the effect that Ratiopharm’s claim for section 8 damages, now continued by Teva, should be reduced to reflect gains realized by Novopharm, Teva’s other corporate predecessor, under its licence agreement with Wyeth [38]. Wyeth’s argument is that while in fact Novopharm had the generic market to itself, in the “but for” scenario which forms the basis for assessing Ratiopharm’s damages, Ratiopharm and Novopharm would have shared the market [40]-[41]. This means that Novopharm’s profits in the “but for” scenario would have been lower than they were in fact. If Ratiopharm’s damages are not adjusted to reflect this excess profit actually gained by Novopharm, then Teva will be in a better position than it would have been had the “but for” scenario actually taken place [43]. The FCA rejected this argument as well.

This conclusion is also seems to me to be correct. If Novopharm and Ratiopharm had not merged, Novopharm would have gained the same windfall, and this would not be any objection to Ratiopharm’s claim. Further, such a windall to Novopharm must have been contemplated by Wyeth, as the possibility of third party generic entry was expressly addressed in the agreement between them. Wyeth could have controlled that windfall by contract, for example by specifying that Novopharm would be bear a corresponding share of the liability for section 8 damages if Wyeth’s efforts to exclude third party entry were unsuccessful. On its face, the contract allocated the risk entirely to Wyeth; presumably as a consequence, Wyeth obtained a better royalty than if Novopharm had shared the risk. If Wyeth could now require Teva to offset the excess profits gained by Novopharm, it would in effect be doing an end-run around the contractual allocation of risk.

Relevance of Non-infringing Alternatives to Damages

Merck & Co, Inc v Apotex Inc / lovastatin 2012 FC 454 Rennie J*

This decision by Rennie J on a motion to strike is the first step in a potentially significant change in the law of damages. In the liability portion of this bifurcated action, Snider J found Apotex liable for infringement of Merck’s patent protecting a process for making lovastatin: 2012 FC 1265 (overview here). Merck sought an accounting, but was denied. This is a preliminary motion in the damages portion of the action, in which Apotex sought to amend its statement of defence to plead that it could have employed a non-infringing alternative process for producing Apo-Lovastatin. While the decision implies in places that this is raised as a complete defence, it is more precise to say that the non-infringing alternative should be considered in determining the hypothetical position that Apotex would have been in but for the infringement [12].

This plea was rejected by Prothonotary Aronovitch, in light of the decision of the House of Lords in United Horse-Shoe and Nail Co Ltd v Stewart Co (1888), 5 RPC 260 (HL), which explicitly held that the existence of a non-infringing alternative is irrelevant to the calculation of damages, and the acceptance of that decision in Domco (1986), 10 CPR (3d) 53 (FCTD) and Jay-Lor 2007 FC 358. Rennie J held that despite this authority, which was properly interpreted by the Prothonotary, Apotex’s position was an arguable claim which should be allowed to proceed to trial. He pointed out that there was some support for Apotex’s position in US law and that there were only two cases on point in Canadian law [24]. Most importantly, at [25]-[27] he accepted Apotex’s argument that the principle in United Horse Shoe was potentially subject to reassessment in light of the general principles of causation in calculation of monetary remedies stated by the SCC in Cadbury Schwepps v FBI Foods [1999] 1 SCR 142 and Canson Enterprises [1991] 3 SCR 534.

My view is that Rennie J was clearly correct in allowing this pleading to stand. As I argued in “A Remedial Benefit-Based Approach to the Innocent-User Problem in the Patenting of Higher Life Forms” (2004), 20 CIPR 79 at 93-95, the principle stated in United Horse Shoe is inconsistent with the “but for” approach to causation which has been invariably accepted by the SCC as the correct approach to all forms of monetary remedy. My article was relied on by the SCC in Monsanto Canada Inc. v. Schmeiser, 2004 SCC 34 [102] as stating the correct principle in respect of an accounting of profits, and, as I argued in the article, there is no difference in principle on this point between an accounting and damages. (I would also point out that Jay-Lor is not particularly strong authority on this point, as it was clear on the facts that the defendant could not have competed as effectively without infringing.)

*In my initial post I misidentified the judge as Zinn J, rather than Rennie J. My apologies.

A Purposive Interpretation of the Promise of the Patent

Astrazeneca Canada Inc v Mylan Pharmaceuticals ULC / anastrozole (NOC) 2012 FCA 109 Evans JA: Sharlow, Dawson JJA aff’g 2011 FC 1023 Rennie J

After the shocking decision in Pfizer v Apotex / latanoprost (NOC) 2011 FCA 236, blogged here, this brief decision of the FCA in Astrazeneca v Mylan / anastrozole (NOC), is the second FCA decision in a row to adopt a moderate approach to interpreting the promise of the patent, coming close on the heels of Mylan v Pfizer / donepezil (NOC) 2012 FCA 103 (blogged here). Whether this marks a trend, or a split in the Court, remains to be seen.

In the decision under appeal, blogged here, Rennie J developed a principled approach to construing the promise of the patent by considering text, context and purpose. While the FCA did not specifically hold that this approach was required, as Mylan did not contest Rennie J’s interpretive framework [21], the FCA decision considered much the same factors as did Rennie J, and in a similarly holistic fashion. This may be simply because Rennie J’s decision shaped the points argued on appeal, but nonetheless, in tenor the FCA decision provides an endorsement of Rennie J’s framework. The appeal turned primarily on the interpretation of a sentence stating that it is “a particular object of the present invention to provide” compounds with fewer undesirable side effects than a prior art compound, aminogluthethimide (AG) [8]. Mylan invited the Court to interpret this as being determinative of the promise. The Court rejected this “microscopic” approach to the promise as “misguided” [32]. This is in contrast to the latanoprost decision, 2011 FCA 236, in which a somewhat differently constituted panel (Sharlow JA was on both) focused microscopically on the fact that the claimed invention was intended to treat a chronic disease.

The FCA anastrozole decision also has some very interesting dicta that further suggests a principled shift in the approach to the promise of the patent. At the outset the Court noted that the invention met the minimum threshold required for utility, and was therefore patentable as of the filing date, unless the patent promised more than the required minimum [7]. The Court subsequently noted at [30] that

it is agreed that the 420 patent would be valid if it only claimed the compound anastrozole and its inhibitory effects on aromatase. It was thus unnecessary for the patent also to promise fewer side effects than AG. Even though tests, which AstraZeneca did not disclose, had been conducted showing that anastrozole was selective, a promise in the patent to this effect would be entirely gratuitous, and could only provide competitors with another basis for attacking its validity.

Similarly, at [37]

even if anastrozole would not be commercially or clinically useful if it produced no fewer side effects than AG, it is agreed that it was patentable as a novel and useful compound, and as an aromatase inhibitor. It would be rational to seek patent protection for anastrozole on this basis, in case it turned out to be selective. . .

This suggests, in effect, that if an inventor has in fact invented and disclosed a patentable invention, she should be presumed to want a valid patent for it. As I have argued elsewhere, this accords both with common sense, and with a purposive approach to patent interpretation. As the SCC has said, “the guiding principle” of purposive construction is that “where the language of the specification, upon a reasonable view of it, can be so read as to afford the inventor protection for that which he has actually in good faith invented, the court, as a rule, will endeavour to give effect to that construction." (Consolboard [1981] 1 SCR 504 at 521, quoting Western Electric v Baldwin Int’l Radio [1934] SCR 570 at 574). If taken to its logical conclusion, this implies that a patentee should never be presumed to promise more than the minimum scintilla of utility required to sustain a valid patent. If that presumption were determinative, the entire promise of the patent doctrine would collapse. However, that presumption of purpose is not determinative within the framework articulated by Rennie J, because text and context must also be considered. It is nonetheless a powerful point in favour of construing the promise of the patent minimally.

Patent Listing Refused Though Generic Formulation Would Necessarily Infringe

Gilead Sciences Canada, Inc. v. Canada (Minister of Health) / COMPLERA 2012 FC 2 Mosley J

The purpose of the PM(NOC) Regulations is to provide a pharmaceutical patentee with what amounts to an automatic interlocutory injunction when faced with generic entry into the market: 2010 FCA 155 [36]. A crucial difference is that instead of the assessment of the likelihood of success on the merits that would be undertaken in an application for an interlocutory injunction, the trigger for the statutory stay is simply that the patent is listed against the drug on the Patent Register. There is nonetheless a functional parallel between these requirements. Likelihood of success in a patent action depends on likelihood of success on both validity and infringement. The fact that the patent has been examined and granted establishes some likelihood of success in respect of validity. The likelihood of success in respect of infringement, on the other hand, is determined by the criteria for listing the patent against the drug on the Register. As explained in the RIAS to the 2006 Amendments, under the original Regulations, as interpreted by the courts, the criteria for listing were too generous, with the consequence that a patent could be listed, and thus trigger the automatic stay, even though the patent might be irrelevant to the drug at issue. As I have discussed in a previous post, the FCA interpretation of the new Regulations has been very strict, but the results in those particular cases were arguably justifiable, as it was not clear on the facts that a generic version of the drug would necessarily infringe the patent in question. In the COMPLERA case Mosley J took the next step, and upheld the decision of the Minister of Health to refuse to list a patent which would necessarily be infringed by any generic version of COMPLERA. In my view, COMPLERA shows that the pendulum has now swung too far the other way.

The facts are relatively simple. COMPLERA is formulated with three medicinal ingredients: (1) tenofovir; (2) emtricitabine; and (3) rilpivirine [3]. The ‘475 patent at issue includes formulation and compound claims to tenofovir and emtricitabine in combination with a non-nucleoside reverse transcriptase inhibitor (NNRTI) [24]. Rilpivirine is an NNRTI [10]. None of this is contested. While Mosley J noted that rilpivirine is not expressly referenced in any of the claims “and can be included only by deductive reasoning because it falls within a named class” [28], the necessary deduction is purely a matter of logic. Thus it is perfectly clear that a generic form of COMPLERA would infringe the ‘475 patent. 

Mosley nonetheless held that the ‘475 patent cannot be listed, essentially because it does not claim a combination specifically naming rilpivirine. Mosley J explained that “[o]n a plain and ordinary reading of paragraph 4(2)(b), all of the ingredients in the NDS have to be found in the formulation in the claim” [47]. I agree with that interpretation of the Regulation, but I don't see how  it justifies the result, as it seems to me that all of the ingredients in the NDS, namely tenofovir, emtricitabine and rilpivirine, are indeed found in the formulation in the claim. The formulation lists an NNRTI, rather than rilpivirine specifically, but I fail to see why this matters. If I point at a shipping container and say that “a Volkswagen Golf, a Ford F150 pick-up truck, and a bicycle are found in this container,” then my statement is true if the container holds a Volkswagen Golf, a Ford F150 pick-up truck, and a Cervélo R5ca bicyle, notwithstanding that I used the generic term “bicycle” rather than specifying the make and model.

Nor is a requirement to specifically name the compound is sensible on a purposive interpretation. Suppose a patentee discloses and claims a revolutionary new class of drugs that cures cancer. As is commonly the case, the best species of the class may be developed afterwards, and so is not disclosed in the pioneer patent. Consequently, under the COMPLERA decision, the pioneer patent could not be listed. At the same time, there might be no patent at all claiming the species specifically, if, for example, it was the result of routine refinements that simply had not yet been carried out at the time of the pioneer patent.

The requirement of product specificity in listing patents on the register plays a parallel role to the requirement of a likelihood of success in seeking an interlocutory injunction. It is important to strike the right balance in so-called "product specificity" in order to ensure that the NOC Regulations provide adequate protection to a patentee, without allowing abuse by listing of irrelevant patents. The old Regulations, as interpreted, adopted an extreme position by allowing a patent to be listed even though it was irrelevant to the formulation in question, and so could not possibly be infringed by a generic version of the drug. The COMPLERA decision adopts another extreme position by refusing to list a patent that must necessarily be infringed by a generic version of the drug. A caveat is that it may be appropriate to refuse to list a patent that would necessarily infringe if the technical advance disclosed by the patent is too minor to warrant the protection of a statutory stay: this, presumably, is the policy behind the exclusion of different chemical forms from the definition of “claim for the medicinal ingredient” in s 2. But that caveat does not justify the COMPLERA decision, as is illustrated by my example of the blockbuster pioneer patent.

(Note that this decision was rendered in January of this year, but it was only recently made available on the FC website.)

Authorization under the Special Access Programme Is Not Previous Approval for the Purpose of the Data Protection Regulations

Teva Canada Limited v. Canada (Health) / ELOXATIN 2012 FCA 106 Stratas JA: Blais, Noël JJA aff’g 2011 FC 507 Campbell J

The main question in this appeal was whether widespread authorization for sale under the Special Access Programme of the Food and Drug Regulations means that a drug is not eligible for listing on the Register of Innovative Drugs. ELOXATIN had been sold by Sanofi from 1999 to 2005 under the Special Access Program, C.08.010(1) (SAP). 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 on the basis that authorization under the SAP meant that ELOXATIN was “previously approved” and so did not qualify for listing as an “innovative drug” under the definition in C.08.004.1(1).

Campbell J dismissed Teva’s application for judicial review of the Minister’s decision to list ELOXATIN (blogged here). The FCA has now affirmed, essentially for the same reasons given by Campbell J. First, “sales under the Special Access Programme alone are not evidence of a determination by the Minister of the safety and efficacy of a drug” [28]. Second, a test that looks at whether the Minister in fact had sufficient information to evaluate the safety and effectiveness of Eloxatin “creates lack of clarity and uncertainty” [30]. For this reason, the issuance of a notice of compliance and a drug identification number constitutes “the magic moment” of approval [31]. And third, the data protection regulations are intended to implement TRIPS and NAFTA, and those treaties imply that the approval in question is marketing approval, and in particular issuance of a notice of compliance and a drug information number [37].

While these reasons strike me as persuasive, there is some merit to Teva’s underlying complaint, which was that the authorization of ELOXATIN under the SAP was widespread, and the Minister had received “massive” amounts of information regarding ELOXATIN’s safety and efficacy [29]. In response Campbell J pointed out that “the SAP sales record proves nothing about oxaliplatin’s safety and effectiveness; it proves that many seriously ill people were willing to take the unapproved ELOXATIN in a hope of getting well” [FC 27]; and as the Stratas JA noted, a case by case inquiry looking beyond authorization itself, to the amount of information actually available to the Minister, would undermine the goals of clarity and certainty [32]. While I agree with both these observations, the result is potentially a kind of evergreening, if Sanofi can sell its product under the SAP and then get data protection once the patent has expired. This contrasts with the paradigmatic use of data protection, which is to provide some form of protection to a drug that is not patentable in the first place. If that is the real problem, then it would be better to respond, institutionally at least, by controlling the use of the SAP in the first place. I should emphasize that I am not suggesting that the SAP was in any way misused in this case, as that point was not in issue in this case. It may be that this was simply a case in which the SAP, properly used, nonetheless resulted in widespread authorization. In that case the lesson may be that the complex administrative structure for regulation and protection of drug products cannot deliver ideal results in all cases.

EWCA on Ex Turpi Causa

Les Laboratoires Servier v Apotex Inc [2012] EWCA Civ 593  rev'g [2011] EWHC 730 (Pat)

In earlier installments of the log-running perindopril saga, Servier obtained an interlocutory injunction preventing Apotex from marketing perindopril in the UK, on the basis of a European patent which was ultimately held to be invalid. Apotex sought damages on the undertaking, but Servier pointed out that the perindopril which would have been sold in the UK, but for the interlocutory injunction, would have been manufactured in Canada and would have infringed a valid Canadian patent. Arnold J, in a decision blogged here, held that ex turpi causa prevented Apotex from recovering damages on the undertaking  The EWCA has now reversed; but while Apotex will be able to claim on the undertaking, its damages will be reduced by the amount which Servier could recover under Canadian law for the infringing manufacture. My post on IPKat discusses the EWCA decision in more detail.

Hiatus

I will be grading exams from now until I take an end of term vacation starting next week, so I will not be able to read any cases for the rest of the month. I'll be blogging again around May 4th or 5th 9th or 10th, starting with the cases that I missed in the interim.

A Shift in Approach to the Promise of the Patent?

Mylan Pharmaceuticals ULC v. Pfizer Canada Inc. / donepezil (NOC) 2012 FCA 103 Mainville JA: Sharlow, Gauthier JJA aff’g 2011 FC 547 Hughes J (ARICEPT, Pat No 1,338,808)

I wrote Tuesday’s post on this decision in a bit of a hurry, as I heading to Ottawa for the Symposium on Utility Requirements: Converging and Diverging Approaches, and there are a couple of points that deserve more attention than I gave them. (The Syposium was a great success – the papers and presentations are available here.)

As I noted in Tuesday’s post, the FCA distinguished its decision in Pfizer / latanoprost 2011 FCA 236. That decision was very problematic because of its unprincipled approach to the construction of the promise of the patent. This point may deserve more emphasis than I gave it. There are a couple of paragraphs from Pfizer / donepezil worth quoting in full:

[56] The patent in Latanoprost claimed a “therapeutic composition for topical treatment of glaucoma or ocular hypertension, containing a prostaglandin…in an amount sufficient to reduce intraocular pressure without causing substantial ocular irritation…”: Latanoprost at para. 8 [emphasis added]. In this unique circumstance, where the patent appeared to be premised on avoiding the disadvantage associated with side effects, this Court construed the patent considered in Latanoprost as promising the avoidance of side effects. In contrast, claim 18 of the ‘808 Patent simply refers to a “ therapeutical composition for treating senile dementia…” without any further promise relating to side effects or toxicity. There is no relation between the ‘808 Patent and the patent reviewed in Latanoprost . The ‘808 Patent is rather akin to the patent reviewed by the Supreme Court of Canada in Wellcome.

To my mind, this is not a particularly convincing distinction, as it was an express object of the ‘808 patent, at issue in Pfizer / donepezil, to develop a drug “which has a persistent activity and a high safety” (disclosure p2, quoted 2011 FC 547 [232]. This and the “unique circumstance” language, suggests that the FCA in Pfizer / donepezil was not so much distinguishing Pfizer / latanoprost, as indicating it was wrongly decided, without saying so directly. Also, as Tony Creber pointed out to me when we spoke about this decision at yesterday’s symposium, it is interesting that the FCA is focusing on the language of the claim, since construction of the promise has typically focused on the description. While this passage certainly does not say that the description should be ignored in construing the promise, even a heightened role for the claim would mark a major shift in this doctrine. (Indeed, an exclusive focus on the claims might mark the end of the doctrine in many contexts; for example, no promise could be extracted from a claim to a compound per se. But we are still far from that point.)

Both of these points are reinforced by the next paragraph:

[57] Though some references are made in the ‘808 Patent to potential toxicity and efficacy benefits of donepezil, and to its potential advantages over prior art compounds, the application judge, on the basis of the expert evidence before him, rightly concluded that these references are not to be construed as promises. He noted that the use of the specification of a patent in order to construe its promise “is not to serve as an invitation to a zealous lawyer to read a patent specification in such a way as to persuade a Court, one way or the other, as to what the promise is”: Reasons at para. 213. As recently aptly noted by Zinn J. of the Federal Court, “the jurisprudence does not permit an unescorted and unchaperoned romp through the disclosure”: Janssen-Ortho Inc. v. Canada (Health) , 2010 FC 42, 82 C.P.R. (4th) 336 at paras. 119-120. The disclosure in the specification is to be understood from the viewpoint of a skilled person in the art or science to which the invention pertains, without resort to technicalities but rather for the purpose of seeking a construction of the claims which is reasonable and fair for both the patentee and the public: Consolboard Inc. v. MacMillan Bloedel (Sask.) Ltd. , [1981] 1 S.C.R. 504 at pp. 520-21.

This paragraph does not expressly change the law, but it is a clear signal that the FCA – or at least this particular panel – is aware of the problems of unpredictability caused by the ad hoc nature of the false promise doctrine. It could also be taken as a message to the Federal Court to be less aggressive in the using the doctrine to impose a heightened utility requirement on patentees.

It is too soon to be sure, but it may be that Pfizer / latanoprost marked the high water mark in the aggressive application of the false promise doctrine, and that Pfizer / donepezil will turn out to be a turning point. I wonder if the extreme nature of the FCA decision in Pfizer / latanoprost may have been a blessing in disguise for pharma patentees, as it may have alerted the FCA as a whole to the problems created by the false promise doctrine.

Pfizer / Latanoprost Distinguished on Interpreting the Promise of the Patent

Mylan Pharmaceuticals ULC v. Pfizer Canada Inc. / donepezil (NOC) 2012 FCA 103 Mainville JA: Sharlow, Gauthier JJA aff’g 2011 FC 547 Hughes J (ARICEPT, Pat No 1,338,808)

The FCA has affirmed the decision of Hughes J finding that Pfizer’s patent for ARICEPT (donepezil) is not invalid for lack of sound prediction. While the FCA decision does not change the law significantly, there are some interesting hints regarding the false promise doctrine. In particular, the FCA distinguished its own very problematic decision in Pfizer / latanoprost 2011 FCA 236.

A central issue in the case was the interpretation of the promise of the patent, which Hughes J had interpreted as promising a new class of compound, including donepezil, which is effective for the treatment of Alzheimer’s [FC 232]. Mylan, before Hughes J and on appeal, had argued that the patent promised that donepezil would have better toxicity and efficacy than prior art compounds [FCA 49]. The question was crucial because of the interplay with the requirement established in Lilly / raloxifene 2009 FCA 97 [15], that when utility is based on sound prediction, as it was in this case [FC 35], the factual basis for that prediction must be found in the patent itself [FC 226]. A more demanding promise would be less likely to be established by the evidence disclosed in the patent.

Hughes J accepted Pfizer’s interpretation of the promise, and held that a sound prediction of the promised utility had been established. Once Hughes J had determined the promise of the patent, the case turned mostly on the facts, and, as I noted in my post on Hughes J’s decision, and the most interesting aspect of Hughes J’s decision was his approach to the construction of the patent. The question is whether the promise of the patent is a question of fact, in the sense of that the promise is to be determined by expert evidence as to what the posita would understand the promise to be, or rather a question of mixed question of fact and law, in which legal arguments and principles are needed to supplement the expert evidence. As I noted in my earlier post, “Hughes J comes down firmly in the latter camp,” and in this decision the FCA has affirmed that Hughes J reached his conclusion as to the promise of the patent “by applying the correct test.” [FCA 52, approving FC 212-18]. Note that the FCA has reaffirmed that “[t]he promise of a patent is a question of law reviewable on appeal on a standard of correctness,” but the court went on to point out that “generally, the construction of the promise is an exercise that requires the assistance of expert evidence, as the promise should be properly defined, within the context of the patent as a whole, through the eyes of a person skilled in the art or science to which the invention” [FCA 48]. I suggest that given this caveat, it is more accurate to describe it as a mixed question of fact and law, though nothing turns on the label.

Perhaps of more interest, the FCA distinguished its decision in Pfizer / latanoprost 2011 FCA 236 as turning on its “unique circumstance” [56]. At one level this says nothing more than that the promise of a patent turns on its own particular facts; and indeed, perhaps nothing more should be read into this. But it could also be an indication that the FCA intends to pull back from the very aggressive interpretation of the promise of the patent that it indulged in Pfizer / latanoprost.

On an entirely distinct point, Mylan had also argued that Hughes J had erred in not considering certain errors in the specification. The FCA affirmed Hughes J, noting that “[t]he minor bona fide data reporting errors do not materially change the results reported in the patent, nor do they affect the inference which a person skilled in the art or science to which the invention pertains would reasonably draw from these reported results” [46].

Post-Final Action Prosecution: Belzberg Distinguished

CD1317 Balloon Catheter / Declath Systems (PAB & Comm'r of Patents)

In Belzberg 2009 FC 657 Simpson J held that “the defects identified in a final action are comprehensive rather than a mere selection” [43], or, as Hughes J put it in Bartley 2011 FC 873 (blogged here) “a ‘Final Action’ must be final” [71]. In both Belzberg and Bartley a Final Action report had been issued, a PAB hearing was convened and concluded that none of the defects identified in the report were substantiated. The Commissioner returned the application to the examiner for further prosecution, though without identifying any problems, after which the examiner issued a new report with new requisitions. In both cases the Federal Court held that this was improper, and the patent should be granted. In CD1317 Balloon Catheter / Declath Systems the applicant invoked Belzberg and Bartley to argue that the patent must be granted when the applicant had responded to all defects identified in the Final Action, even though in so doing new problems had been introduced. The PAB and Commissioner held, rightly in my view, that Belzberg and Bartley were distinguishable, and remanded for further prosecution.

SCC Denies Leave in Corlac v Weatherford

The SCC today denied leave to appeal in Corlac Inc v Weatherford Canada Ltd 2011 FCA 228 (blogged here and here).

Is Requiring Security for Costs for Foreign Residents Contrary to TRIPS?

Fraser v. Janes Family Foods Ltd. 2012 FCA 99 Noël JA: Blais CJ; Gauthier JA

Prothonotary Aalto ordered that the plaintiff / appellants post security for costs on the basis, inter alia, that they were “ordinarily resident outside Canada,” which is a factor set out in Rule 416(1)(a). On appeal to the FCA, the appellants raised the argument that this Rule is contrary to NAFTA and TRIPS. The FCA held that it is doubtful whether the Rule is contrary to the national treatment provisions of those agreements, as Rule 416(1)(a) turns not on nationality, but on the distinct concept of residency [9]-[11], so that in some circumstances a Canadian national could be required to post security on the basis of this Rule. The appellants argued that even if that was formally true, the effect of the Rule in practice would be to subject foreign nationals to differential treatment [12]. The FCA did not resolve that argument, as it held that even if the Rule was contrary to NAFTA or TRIPS for this reason, those agreements do not directly have the force of law [15], and the Rule is sufficiently clear that it cannot be brought into line with those agreements (assuming there is any conflict), by interpreting it in the manner urged by the appellants [19].

While this resolves the point of law, it leaves open the possibility that this Rule is in conflict with TRIPS and NAFTA, and so might require amendment. My initial impression is that even if some amendment were required, it would not have a significant practical impact. The factors set out in Rule 416(1) all go to the question of whether the payment of costs is likely to be problematic if the plaintiffs are unsuccessful. A general discretionary rule requiring posting of security for costs in circumstances were payment was likely to be problematic, is surely legitimate and would pass muster under NAFTA and TRIPS, and yet it is just as likely to differentially affect foreign nationals. By analogy, one factor in determining whether a Mareva injunction should be granted is whether assets are likely to be removed from the jurisdiction in order to avoid satisfaction of a judgment. This is not a strict rule, as the impact of reciprocal enforcement of judgment legislation must be considered, but it is likely to differentially impact foreign litigants. However, it is substantively neutral. Put another way, to require that the court ignore the fact that judgments and costs orders may be more difficult to collect against foreign litigants would not artificially disadvantage foreign litigants, but artificially privilege them.

Article on Disclosure of Factual Basis of Sound Prediction

In a number of previous posts I have been critical of the doctrine that the factual basis for sound prediction must be disclosed in the patent itself, and I have finally managed to finish a good draft of an article on the topic. The abstract is below; the article is available for download from SSRN. This is still a draft, so feedback is welcome. (And I'll say now that I only picked up Vol 29(7) of the CIPR after finishing this draft, so it doesn't refer to any of the three(!) articles on sound prediction in that issue.)

Abstract
It has been accepted at least since the Supreme Court decision in Consolboard v MacMillam Bloedel that the evidence supporting utility need not be disclosed in the patent itself. However, in its 2009 decision in Lilly / raloxifene, the Federal Court of Appeal held that when utility is based on sound prediction, the supporting evidence must be disclosed in the specification. Since that time, the raloxifene doctrine has been determinative of invalidity in three important pharmaceutical cases, including, most recently, the blockbuster blood-thinner, PLAVIX. This article argues that the raloxifene doctrine is unsound. There is no basis in the text of the Patent Act, in legal principle, or in practice, for a distinction between demonstrated utility and utility based on sound prediction. The raloxifene doctrine is not supported by the case law; there is no leading case affirming the validity of a patent on the basis of sound prediction in which the factual basis for the sound prediction was disclosed in the patent. Neither US nor European law has any such requirement. The raloxifene doctrine is unsound in principle, as neither the disclosure requirement, nor the utility requirement, purposively understood, mandates disclosure of the evidence supporting utility. Introducing such a requirement engenders technical attacks on patents for valuable inventions, without providing any offsetting benefit to the public. In short, the raloxifene doctrine is an ill-advised departure from well-established legal principles which threatens to undermine the crucial incentives to innovation in the pharmaceutical industry that are provided by the international patent system. It should be abandoned at the earliest possible opportunity.

The “No Reach Back” Shoe is on the Other Foot – Sort of

Apotex Inc. v. Merck Frosst Canada Ltd. / lovastatin (NOC) 2011 FCA 364 Evans JA: Gauthier, Stratas JJA rev’g 2010 FC 1264 Snider J

This decision of the FCA is an important development, though not a final answer, in the debate over whether a generic which has succeeded in an NOC proceeding can get section 8 damages even if the patent is subsequently determined to be valid and infringed in an infringement action.

An initial question in this appeal was whether Apotex’s claim for compensation is governed by the 1993 NOC Regulations, or the 1998 Regulations. Under the transitional provisions, this turns on whether Merck’s application for prohibition was “pending” on the transitional date of March 11, 1998. On the transitional date the Federal Court had already dismissed Merck’s application for prohibition, and Merck had filed an appeal from this decision, but the appeal (which was ultimately dismissed for mootness) had not yet been decided. Snider J held that the 1993 Regulations applied. The FCA reversed Snider J on this point, essentially because she did not have the benefit of the FCA decision in Merck / norflaxin 2011 FCA 329 (blogged here). In an interesting point of statutory interpretation, the FCA held that an interpretation favouring the 1998 Regulations was to be preferred, as they were intended to, and did, clarify the 1993 Regulations [28]. In the result, the FCA stipulated a broad understanding of “pending.” The question is not whether the action is moot, but whether FCA still has jurisdiction to hear an appeal. The holding that the 1998 Regulations applies makes the Court’s conclusion on the substantive issue that much more important.

The question as to whether Apotex was entitled to section 8 damages arose because the stay expired without the application for the order of prohibition ever having been heard on the merits. Apotex argued that Merck had not been successful in the NOC proceedings. Merck, on the other hand, argued that it wasn’t unsuccessful, either. Snider J, interpreting the 1993 Regulations (blogged here), held that entitlement was triggered only when the Minister issued the NOC after expiry of the relevant patents; because the patent had not expired, Apotex was not entitled to damages. The FCA, interpreting the new Regulations, held that the only requirements for triggering section 8 are that the patentee’s application for prohibition is dismissed [34], and that the generic has suffered a loss by being kept out of the market as a result of the stay [35]. As both conditions were satisfied, Apotex was entitled to section 8 damages – with a major caveat.

On a broader level, the argument in favour of allowing the generic to claim damages in a case in which the patent was held invalid in the NOC proceedings, but valid in a subsequent infringement action, is the “no reach back” rule enunciated in Syntex / naproxen (NOC) 2010 FCA 155, which has since been affirmed a number of times (eg here and here). This principle says that NOC proceedings and an infringement action are independent. To be entitled to section 8 damages, the generic must succeed in the NOC proceeding itself; if it loses in the NOC proceeding, but subsequently prevails in the infringement action, the generic cannot reach back and apply the declaration of invalidity from the infringement action to gain entitlement to section 8 damages. Conversely, it would seem to follow that if the generic is successful in the NOC proceedings, but subsequently loses the infringement action, the patentee cannot reach back and apply the declaration of validity in the infringement action to deny the generic section 8 damages. While this result seemed to follow, it had not been tested, until now. Consistently with the no reach back rule, the FCA in this case held that Apotex could claim section 8 damages.

The difficulty with this logic, as Merck pointed out [33], is that the generic would be entitled to damages for having been kept out of a market which it had no right to enter. A holding in NOC proceedings that the patentee did not show the allegation of invalidity to be unjustified is not an in rem declaration of invalidity. If the patent is subsequently held to be valid in litigation, then it was always valid, including during the period when the generic entered the market after the NOC proceedings. This means that the generic had no right to enter the market, which we know with hindsight was protected by a valid patent; it is simply that the procedural mechanism of the NOC proceedings did not immediately vindicate the patentee’s right. In this case, Merck characterized this as a matter of ex turpi causa.

This leads to the major caveat on the generic’s entitlement to damages. The FCA reconciled these two conflicting principles by applying the no reach back rule in the liability question, and the ex turpi causa point in the damages phase. Apotex is entitled to section 8 damages, under the no reach back rule, but the quantum of damages might be reduced “or eliminated” [37] at the damages calculation as a result of ex turpi causa:

[38] The Court’s broad discretion under subsection 8(5) allows it, when considering arguments based on ex turpi causa, to have regard to the factual situation in its entirety, including its nuances. In the present case, one such nuance is that not all the tablets sold by Apotex were found in the infringement action to contain lovastatin made by the infringing process. A court is likely to find it easier to apply the ex turpi causa principle through an exercise of judicial discretion than through the definition of liability. Discretion enables the court to assess the appropriate amount of compensation payable (including nil) in a manner that properly takes account of all the relevant facts.

The Court did not decide whether Apotex was actually entitled to substantial damages on the facts, holding that this was a matter to be returned to the trial judge, including the crucial question of “the extent to which the ex turpi causa principle should be applied on these facts, if at all.” While the FCA is no doubt right to say that this is a matter which turns on issues of law and fact which should be determined by a trial judge, it also raises a crucial issue of principle on which the FCA has provided no guidance. The result is that this decision is an important step in the resolution of this question, but it is very far from being the final word.

Mayo v Prometheus

I've posted my initial reaction to the USSC decision in Mayo v Prometheus on IPKat, here.

Lovastatin Decision Affirmed on the Facts

Apotex Inc v Merck & Co Inc / lovastatin 2011 FCA 363, Gauthier JA: Evans, Stratas JJA aff’g 2010 FC 1265 Snider J

In a decision delivered last December, that has yet to be released on the FCA website, Gauthier J, writing for the court in what I believe is her first patent decision since being appointed to the FCA, has affirmed Snider J’s lovastatin decision in an appeal that essentially asked the FCA to reweigh the evidence. Leave to appeal to the SCC has been sought, but I would astonished if it were granted.

Legally, there are only two points of passing interest. First, Gauthier J’s opinion provides a brief but thorough discussion of the law related to the standard of appellate review. While this will not be a leading case in that it does not change the law, it will be a very useful reference decision on this issue.

Secondly, Snider J had interpreted s 55.1 (s 39(2) under the old Act), which provides that “In an action for infringement of a patent granted for a process for obtaining a new product, any product that is the same as the new product shall, in the absence of proof to the contrary, be considered to have been produced by the patented process,” as placing the persuasive burden of proving infringement on the patentee [FC 168- 184]. The FCA refused to endorse this interpretation, on the basis that the burden of proof was not determinative of the appeal, and Snider J did not have the benefit of full argument on the issue [9-10]. In my view, it is a wholly salutary principle that holdings of law are entitled to little weight if they are not essential to the case and are made without the benefit of full argument. Now, if only the SCC would take that principle to heart, and quit its bad habit of making new law in obiter on unargued points.