Any Calculation Will Be Complex and Contentious

Philip Morris Products SA v Marlboro Canada Ltd 2015 FC 364 de Montigny J

This issue in this decision in the Philip Morris v Marlboro litigation is whether Marlboro Canada and Imperial Tobacco (ITL), which prevailed in a trademark action, should be entitled to elect an accounting of profits. It is relevant to the same question in the patent context, as de Montigny J relied on the patent case law on the same point [17] and he was clearly of the view that the applicable principles are the same in both contexts. The decision is noteworthy for its extensive review of the factors to be considered in deciding whether to allow a successful party to elect an accounting.

As I noted in a previous post, there is something of a split between cases suggesting that a patentee will normally be permitted to elect an accounting unless there is some reason why that remedy should be denied, and others indicating that an accounting will be denied unless the plaintiff can show some positive reason why it should be granted. That issue was directly raised in Philip Morris, as ITL argued that “the remedy is ordinarily awarded unless there are special circumstances,” whereas Philip Morris, the defendant on the trademark claim, argued that the Court must simply balance the equities and decide whether the remedy is appropriate in the circumstances [18]. de Montigny J held that an accounting is not a presumptive remedy and the trial judge has complete discretion [19], but on the whole, this decision falls into the first category (my emphasis):

[21] I shall therefore weigh the relevant factors in light of the equitable purposes of the remedy, bearing in mind that the Defendants have no right to an accounting of profits but that they should not be denied that option in the absence of any compelling reasons.

(While ITL was the successful party in the litigation, it was the defendant on the underlying action, and the plaintiff only by counterclaim, and so is referred to as the “Defendant” by de Montigny J, while Philip Morris is referred to as the “Plaintiff”.)

de Montigny J then reviewed a number of factors. This list is of course not exhaustive, but only reflects those raised by the parties. And, as de Montigny J noted, "none of the factors is controlling, in and of itself” [21].
 
(1) The claimant's conduct
The main point here is that “As for delay, it would dearly be inequitable to allow a plaintiff to recover profits made by a defendant while the plaintiff was aware of the infringement for some time and did nothing about it” [22]. This strikes me as sensible. Delay should not be encouraged, particularly when the defendant reasonably believes it is not infringing and so may be relying on the status quo. 

On the facts, there was no undue delay in this case, nor was there any allegation of unclean hands [22]-[23]. de Montigny J then held that "All these factors clearly militate in favour of an accounting of profits - and indeed the Plaintiffs do not contest any of these arguments [24]. It is interesting that the fact that there is no undue delay and no unclean hands militates in favour of an accounting, rather than being neutral. This reinforces the point that an accounting will be granted unless there is some reason not to do so.

(2) Complexity of an accounting of profits
The complexity of an accounting of profits is often raised as a factor militating against an accounting, and indeed is cited as the main reason why US law abolished the accounting remedy in patent cases. The key point made by de Montigny J on this issue is that “the calculation of damages is likely to be as complex as the accounting of profits” [31]. While is true that an accounting in this case would be difficult [27]-[29], “[j]ust as with accounting, the causation/apportionment issues will likely be contentious in the calculation of damages” [31]. Consequently,

[32] [A]ny calculation will be complex and contentious, whether in relation to assess the damages or in relation to the apportionment issue. For that reason, I am of the view that the complexity factor weighs neither for nor against the accounting of profits.

In my view this is an entirely sound point which is too often overlooked. The correct question is not whether an accounting is complex, but whether it is substantially more complex than the damages calculation would be. When the accounting remedy was rejected in US law, the principles used in assessing the defendant’s profits were not the same as those used in modern Canadian law. In Canadian law, the basic “but for” inquiry is conceptually the same in either case, particularly when lost profit damages are claimed. Depending on the particular facts, an accounting may be more complex than the damages assessment, but it may also be less complex or roughly equivalent, as in this case.

Another point made by de Montigny J is that the absolute complexity is not the main issue, but rather proportionality: “the Court is essentially concerned with the proportionality of the accounting remedy in view of the length or extent of the infringing activity and the likely benefit of the accounting exercise” [29].

(3) The infringer’s conduct
Here de Montigny J noted that the legal issue in question “was a genuinely novel legal issue, and not a case of blatant infringement” [35]. He contrasted this was Varco 2013 FC 750 (blogged here) in which the defendants “knew the patent infringement was blatant and the only defence would be patent invalidity” [35]. I am not persuaded by this distinction. Many granted patents turn out to be invalid, and I don’t see why it is more blameworthy to proceed in the face of uncertainty as to liability on the facts, as opposed to uncertainty as to liability as a matter of law. It is entirely legitimate to infringe a patent in order to test its validity, and a defendant who does so successfully is doing a public service, as the benefit of lower prices from having a bad patent held invalid redounds to society as a whole in the form of lower prices. Such infringement should not be discouraged by the threat of a more severe remedy. (This is not to say that an accounting should never be awarded in the case of patent infringement, but only that the distinction between uncertainty in the law and uncertainty on the facts does not strike me as a proper consideration in deciding whether to allow an accounting.)

(4) The claimant's damages
The defendant, Philip Morris, argued that “if the claimant could never have earned the profits or was in no way harmed by the infringement, accounting would be an undue windfall to the claimant” [36]. de Montigny J rejected this both for lack of authority, and because taking this factor into account would require a detailed assessment of disputed evidence [37]-[38]. This seems right to me: to take into account the plaintiff’s damages would require the court to undertake an assessment of damages as part of the analysis of whether to allow the plaintiff to elect an accounting. This is impractical.

(5) Actual confusion
This factor is specific to trademark litigation.

Thanks to Alan Macek's IPPractice for making this case available before it is posted on the FC website.

IP License can be used to create a PMSI

Contech Enterprises Ltd. v Vegherb, LLC, 2015 BCCA 99

While security interests in IP have been the topic of law reform projects, conferences and academic articles over the past decade or more, we do not have many of cases directly on point. The BCCA decision in Contech is a welcome development because it is, in my view, correct in both the reasoning and the result. In many ways it is a relatively easy case which does not directly deal with the most contentious issues, such as priority conflicts when one party registers under the PPSA and the other under the relevant federal IP Act, but it does establish a solid foundation on which to address those more difficult questions. I will not discuss it in more detail here, as Professor Tony Duggan and I are planning on writing a brief case comment for the IPJ.

Foreign Issue Estoppel in Theory and Practice

AstraZeneca Canada Inc v Apotex Inc / omeprazole 2015 FC 322 Barnes J
            1,292,693 / omeprazole formulation / LOSEC

An overview of this litigation is given in yesterday’s post. Parallel litigation US had taken place between the parties and AstraZeneca argued that principles of issue estoppel and abuse of process should apply to prevent relitigation of a number of findings of fact made by the US court in that previous litigation. There is an interesting issue of principle, discussed here, here and here, as to whether issue estoppel in Canadian patent litigation can be based on foreign findings of fact. The theory in favour of accepting foreign issue estoppel is the same as for domestic issue estoppel: it will save judicial resources and save the embarrassment of inconsistent decisions.

Barnes J recognized this theoretical argument, but he had a powerful rejoinder:

[379 [T]he practical problems of applying estoppel in a way that will actually protect judicial resources cannot be ignored. Those problems were quite apparent in this case.

[380] Given the discretionary nature of the application of foreign issue estoppel, AstraZeneca could not prudently assume the doctrine would be applied. It, therefore, independently led evidence on all of the above evidentiary points required to make its case. The practical effect of this was that no time was saved. In fact, by pleading estoppel, the trial was substantially lengthened. In response to AstraZeneca’s plea of estoppel, Apotex led fact evidence from two attorneys involved in the United States omeprazole proceedings, Martin Endres and Robert Silver. It also led opinion evidence from two legal experts, Judge Benson Legg (retired) and Mr. John Whealan. That evidence described the approach that the United States District Court took to the management of its multi-party infringement actions including the separation of the proceeding into waves. The purpose of this evidence was to attempt to explain the differences between United States and Canadian procedures and substantive patent law and to show that the two systems are sufficiently distinct that the application of estoppel would work an injustice on Apotex.

The theory is that foreign issue estoppel will reduce litigation costs; the practical reality, at least in this case, is that costs were increased to no benefit. Consequently,

[381] Considering the somewhat unusual process that was followed in the United States second wave proceedings involving Apotex, the practical disadvantages of applying issue estoppel to only a handful of findings made in that proceeding, and the fact that it is not necessary to rely upon the doctrine to fill a gap in the evidentiary record, I decline to apply the principle here.

Product Claim Not Limited to Process Contemplated by Patentee

AstraZeneca Canada Inc v Apotex Inc / omeprazole 2015 FC 322 Barnes J
            1,292,693 / omeprazole formulation / LOSEC

In this Omeprazole formulation decision, which turned primarily on the facts, Barnes J held AstraZeneca’s ‘693 patent to valid and infringed. While the decision does not break new legal ground, it does illustrate some points of interest with respect to claim drafting, claim construction and litigation strategy. Also, in the bigger picture, some are inclined to characterize any pharmaceutical patent other than that for the API per se, and in particular formulation and dosage form patents, as “evergreening” patents which should not be allowed. In this case it was established that formulation of omeprazole presented a difficult problem which had to be solved to produce a medically useful drug and consequently, after a detailed review of the facts - the decision was 177 pages long - the invention was held to be non-obvious [273]. This contrasts with other recent cases, discussed here and here, in which dosage and formulation patents were held to be obvious. The lesson is a simple one, but perhaps worth repeating: sometimes formulation patents are good and sometimes they are bad, and either way, they are carefully scrutinized by the courts.

Tadalafil Formulation Patent Obvious and Not Infringed on the Facts

Eli Lilly Canada Inc v Mylan Pharmaceuticals ULC / Tadalafil Formulation (NOC) 2015 FC 178 de Montigny J
            2,379,948 / Tadalafil formulation / CIALIS

Tadalafil Formulation (NOC) concerns Lilly's ‘948 patent for a formulation of tadalafil with free drug particles of less than a specified size (40 microns in Claim 1) plus specified excipients [20]. de Montigny J found Mylan’s allegations of non-infringement and obviousness to be justified. The decision turned entirely on the facts. As counsel for Lilly stated at one point, “a lot of it just comes down to which expert the Court is going to go with” [92]. For the most part, the Court went with Mylan’s expert. The points of most general interest are an evidentiary point concerning provision of testing data in an NOC proceeding, and a point regarding the use of documents which are not cited in the NOA. There are also a couple of points that may be of interest in interpreting formulation claims.

Deferential Review of Factual Findings of the Re-examination Board

Newco Tank Corp v Canada (Attorney General)2015 FCA 47 Ryer J: Webb, Near JJA, aff’g 2014 FC 287 Mosley J
            2,421,384

In this re-examination the Board cancelled three of the claims of the ‘384 patent as being obvious. An appeal to the FC was dismissed on the facts, as discussed here. On appeal to the FCA, the patentee argued that the Board had erred in law by construing the “information presented as background knowledge in the patent itself” as being an admission of the common general knowledge [7]. In particular the patentee argued that the invention lay in the identification of the problem (inefficiency in heating of liquid storage tanks at well sites) and so it was an error to conclude that the problem itself was known merely because it was identified in the patent.

The FCA dismissed the appeal on the basis that the Board’s finding that the common general knowledge of the skilled person included the information presented as background knowledge in the patent itself was simply a factual finding [10], and so was properly reviewed by the FC on a deferential (reasonableness) standard [12]. I do not take this as a holding that any statements in the patent are indeed to be considered to be admissions as to the state of the common general knowledge; as I read it, the FCA was only saying that in this particular case it was reasonable for the Board to have concluded that the statements in question described the common general knowledge.

Is There a Requirement to Refer to Evidence of Demonstrated Utility in the Patent?

Les Laboratoires Servier v Apotex Inc / gliclazide (NOC) 2015 FC 108 Roy J
            2,629,670 / gliclazide / DIAMICRON MR

As noted yesterday, in Gliclazide Dosage Form Roy J dismissed Servier’s application for an order of prohibition primarily on the basis of non-infringement [147], though he went on to hold the patent to be obvious and lacking in utility. The findings of non-infringement and obviousness were legally straightforward, but in the utility analysis has an important novel development (as if the law of utility was not controversial enough as it is): Roy J held that the factual basis for demonstrated utility must be referred to in the patent.

Servier argued that the promised utility was demonstrated by two bioequivalence studies. However, neither of these studies was alluded to in the specification [213]. Roy J held that these studies cannot be considered in establishing demonstrated utility:

the tests Servier points to that are not referred to in the `670 Patent are not relevant for establishing demonstrated utility [216].

It is now established in Canadian law that when utility is based on sound prediction, the factual basis for that prediction must be disclosed in the specification. Roy J did not hold that the factual basis for demonstrated utility must be disclosed, but he did hold that it must be referred to. That is, the distinction between sound prediction and demonstrated utility is whether the data itself must be set out in the patent, or whether it is sufficient to merely reference the relevant tests.

Gliclazide Dosage Form Patent Obvious and Not Infringed

Les Laboratoires Servier v Apotex Inc / gliclazide (NOC) 2015 FC 108 Roy J
            2,629,670 / gliclazide / DIAMICRON MR

In Gliclazide Dosage Form Roy J dismissed Servier’s application for an order of prohibition, primarily on the basis of non-infringement [147], though he went on to hold the patent to be obvious and lacking in utility. The findings of non-infringement and obviousness turned largely on the facts and do not raise any novel legal issues, but the discussion of utility is noteworthy for holding explicitly that the factual basis for demonstrated utility must be disclosed in the patent. This post discusses the first points, and tomorrow’s will discuss utility.

Gliclazide is a known compound used for treating diabetes. The original dosage form was a breakable immediate release tablet [4]. Subsequently, a modified (slow) release tablet was developed, but it was not breakable [5]; some modified release formulations should not be broken, as dividing the tablet will alter the release profile. The invention of the ‘670 patent is related to a breakable modified release table with an identical dissolution profile whether or not it has been subdivided [70]. It was not disputed that the essential elements of claim 1 of the ‘670 patent are to a “gliclazide, a cellulose derivative which provides the modified release of the active ingredient, a binder and, once subdivided, that the gliclazide tablet has an identical dissolution profile to that of the whole tablet” [101]. The other asserted claims were variations on this theme [80].

There was dispute as to whether Apotex’ product had a binder: Apotex argued that it’s product was held together by compression, without a separate binder, while Servier argued that the cellulose derivative that was present in Apotex' product can serve both as a binder and a modified release matrix [113], [116]. There was also dispute as to whether the “identical dissolution profile” referred to the profile measured in vitro or in vivo. Apotex prevailed on both these point, which turned primarily on the terms of the patent itself. Without going into the details, I will simply say that Roy J’s analysis on these issues struck me as entirely sound.

The finding of non-infringement followed almost directly from the claim construction. There are two points of some general interest. First, Servier argued that Apotex’ evidence of its manufacturing process, which goes to the point that it tablets were held together by compression, without a binder, was inadmissible because it was not disclosed in the NOA [133]. Roy J rejected this on basis “that Apotex did not have to anticipate the position Servier chose to take,” which is to say the position that the patent should be construed to that the cellulose derivative could serve a dual purpose [133]. Roy J at [136] quoted the FCA 2005 FCA 270 [16]: “A second person [the generic] should not be required to anticipate every theory of possible infringement, however speculative, in the detailed statement supporting its allegations.”

The second point of some interest is that Servier argued that the fact that Apotex had obtained regulatory approval by showing bioequivalence with Servier’s product showed that Apotex’ product must have had an identical in vivo dissolution rate [141]. Roy J rejected this on the basis that even if that is true, the patent, properly construed, speaks to in vitro dissolution rate [142]. So, while infringement in NOC proceedings is often conceded, regulatory approval using the patentee’s product as a comparator, does not necessarily imply infringement of a patent covering that product.

The obviousness aspect of the Roy J’s decision turned straightforwardly on the facts: “[185] In my opinion, Apotex has in effect shown that the skilled worker would have been able to combine the mosaic of prior art into the claimed invention. The step was not high. The gap was not broad.”

Golden Bonus Rule Applied

Janssen Inc v Teva Canada Ltd / bortezomib (NOC) 2015 FC 184 Barnes J
            2,435,146 – bortezomib formulation – VELCADE

In this NOC proceeding Barnes J held the claimed invention to be obvious using an obvious-to-try analysis. While the case turned largely on the facts, it does make one important legal point of general interest, which is that the discovery of a non-obvious characteristic of an otherwise obvious invention cannot support a patent. This is known in UK law as the “golden bonus” rule. And while not as legally noteworthy, Barnes J’s decision is a very good example of the application of the obvious to try analysis to hold a patent invalid. Finally, the argument turned in part on the identity of the skilled person, and the case illustrates the established law that the patent must be read as a whole when identifying the expertise of the person skilled in the art.

More File Wrapper Estoppel in Canada

Eli Lilly Canada Inc. v. Mylan Pharmaceuticals ULC / tadalafil (NOC) 2015 FC 125 de Montigny J
            2,371,684 – tadalafil dosage form – CIALIS

The ‘684 patent was for tadalafil in a dosage form of less than 20mg, with separate claims to various specific dosage forms (eg “5. The dosage form of claim 3 comprising about 5 mg of the compound in unit dosage form”). A question arose as to whether a maximum daily dosage of 20mg should be considered to be an essential element of the claims [150]. de Montigny J rejected this argument, relying in part on the file history. The application originally filed with the Patent Office contained claims reciting the method of treating sexual dysfunction comprising administering about 1 to 20 mg tadalafil, up to a maximum total dose of 20 mg per day. These claims were rejected for claiming a method of medical treatment. In response, Lilly redrafted these claims as “use” claims and removed any reference to a maximum total dose per day [154]. Citing his own prior decision in Distrimedic 2013 FC 1043, [209-10], held that it was proper to use this file history in interpreting the claims:

[154] While the file history of a patent application is generally considered as extrinsic evidence and not admissible, I have already held that a change in the wording of a claim as a result of an objection from the Patent Office is an objective fact that can be considered and from which an inference may de drawn

This is notwithstanding the SCC’s insistence in Free World 2000 SCC 66 that in light of the objective nature of claim construction “To allow . . . extrinsic evidence [such as statements or admissions made in the course of patent prosecution] for the purpose of defining the monopoly would undermine the public notice function of the claims, and increase uncertainty as well as fuelling the already overheated engines of patent litigation” [66]. As I argued in my post on Distrimedic, de Montigny J is right to allow this use of the file history and the SCC is wrong. This Tadalafil Dosage Form decision provides another illustration of why it is wrong to allow a patentee to try to reclaim in litigation a limitation that it gave up in prosecution. As discussed here, the alternative approach to dealing with this kind of shifting position is to invoke s 53(1), potentially resulting in the invalidation of the entire patent. Patentees might prefer to embrace file wrapper estoppel.

Promise of the Patent and Obviousness

Eli Lilly Canada Inc. v. Mylan Pharmaceuticals ULC / tadalafil (NOC) 2015 FC 125 de Montigny J
            2,371,684 – tadalafil dosage form – CIALIS

In Plavix 2013 FCA 186 the FCA held that utility will only be measured against the promise of the patent when an “explicit” promise is made and “it should not be taken to have assumed that every patent contains an explicit promise” [49]-[50]. As I noted in my post on that decision “The crucial question will be how explicit a promise must be in order to establish the standard for utility.” I predicted that direct statements of use such as ‘The compounds of this invention . . . are useful” for a particular purpose would be treated as promises. de Montigny J’s decision in Tadalafil Dosage Form confirms this prediction. (For a similar decision, see also 2014 FC 638, blogged here). Consequently, it seems that while Plavix may have restrained some of the more aggressive applications of the doctrine, the promise of the patent remains very much a central feature of Canadian patent law. The case also illustrates that the promise doctrine is unnecessary to deal with defects that are better addressed by the non-obviousness requirement.

It’s significant that de Montigny J began his discussion of utility with the following statement:

[85] The promise of a patent is fundamental to the utility analysis and must be ascertained at its outset. As stated by the Federal Court of Appeal in Sanofi-Aventis v Apotex, 2013 FCA 186, at para 47, “[t]he promise of the patent is the standard against which the utility of the invention described in the patent is measured”.

This would have been uncontroversial pre-Plavix, but it is difficult to square with the holding in Plavix that “it should not be taken to have assumed that every patent contains an explicit promise.” This reversion to this pre-Plavix premise suggests that Plavix’s impact may be quite limited.

The ‘684 patent was for tadalafil in a dosage form of less than 20mg. Lilly’s position was that the promise of the patent is that the claimed doses are efficacious and have a better side effects profile than sildenafil [86], while Mylan argued that the patent promised not just an improved side effects profile, but to reduce side effects to “clinically insignificant levels” [95]. The particular side effects in question were flushing, vision abnormalities, and a potentially life-threatening reduction of blood pressure when tadalafil is co-administered with nitrates, which are used to treat heart conditions. The last was most important because it is potentially fatal [90].

Key language in the patent included the following statements [93]-[94]:

Most unexpectedly, the product also can be administered with clinically insignificant side effects associated with the combined effects of a PDE5 inhibitor and an organic nitrate. Thus, the contraindication once believed 20 necessary for a product containing a PDES inhibitor is unnecessary when Compound (I) is administered as a unit dose of about 1 to about 20 mg, as disclosed herein. (4)

The present invention is based on detailed 25 experiments and clinical trials, and the unexpected observations that side effects previously believed to be indicative of PDE5 inhibition can be reduced to clinically insignificant levels by the selection of a compound and unit dose. (10)

de Montigny J construed this and other similar language as promising a reduction of side effects to clinically insignificant levels. The promise was held not to be satisfied, in part because co-administration of tadalafil and nitrates is strictly contraindicated by both US and Canadian health regulatory authorities [61]. Thus, the patent was construed as promising a regulatory standard of utility [99]. Since it is well-established that regulatory approval is not the general standard for patentable utility, it is clear that the patent was construed as promising a much higher utility than the minimum which would be required to establish patentable utility in the absence of an explicit promise.

Consequently, the patent was held to be invalid for failing to meet this stringent standard for the promised utility [122]. However, the heightened promise was not determinative, as de Montigny J held that even the promise proposed by Lilly, namely an improved side effects profile as compared with sildenafil, had not been established [144].

This decision shows that the promise doctrine continues to play a central role in the Canadian law of utility. I have been and continue to be critical of that doctrine: see Form and Function in the Law of Utility: A Reply to Gold & Shortt, (2015) 30(2) CIPR 109 (draft version available here). As I see it, even Lilly put the promise too high. The ‘684 patent is clearly useful, because the claimed invention is effective in treating ED.

With that said, the fact that tadalafil does not have an improved side effects profile as compared with sildenafil is certainly relevant to the validity of the '684 patent, but it goes to obviousness, not utility; and, as discussed yesterday, the patent was properly held to be invalid on that basis. Indeed, the question of whether the side effects are reduced to clinically insignificant levels is relevant to obviousness. This is not because obviousness is measured against statements made in the patent. Rather, as discussed in yesterday’s post, on the facts a reduced dosage is expected to result in reduced side effects, and therefore a reduced dosage form would only be inventive if the side effects were reduced to an unexpected degree. The assertion that the side effects were reduced to clinically insignificant levels was likely made to convince the examiner that the reduction in side effects was sufficiently unexpected to satisfy the inventive step requirement. This does not mean that the patentee should be held to such promises of utility, as some have suggested. On the contrary, it is will established that the standard for obviousness is objective; it is what a skilled person would find obvious, not what the inventor thought was obvious. (See eg Nichia Corporation v Argos Ltd, [2007] EWCA Civ 741 [13].) The proper response is simpler. Regardless of what the patentee might have “promised” or not “promised” if the reduction in side effects are not in fact large enough to be unexpected to a person skilled in the art, then the patent will be invalid for obviousness. That is exactly what happened in this case.

Reduced Dosage Form of Tadalafil Obvious to Try

Eli Lilly Canada Inc. v. Mylan Pharmaceuticals ULC / tadalafil (NOC) 2015 FC 125 de Montigny J
            2,371,684 – tadalafil dosage form – CIALIS

In this NOC proceeding de Montigny J held that Lilly’s tadalafil dosage form patent was invalid for failure to satisfy the promise of the patent, as being anticipated, and for obviousness. While the decision raises some interesting legal points regarding the promise of the patent, anticipation, and prosecution history estoppel, the holding respecting obviousness was quite straightforward and it is convenient to begin by discussing that aspect of the case.

Both sildenafil and tadalafil were known in the prior art for the treatment of ED. Lilly’s ‘784 patent, claiming tadalafil for the treatment of ED, disclosed unit doses of tadalafil from 0.2 to 400 mg [4] (and see 2015 FC 17, blogged here, holding the ‘784 patent to be valid). Sildenafil was marketed in doses of 25 mg, 50 mg, and 100 mg, with 100mg being the most common dose [6], [10]. Sildenafil has a variety of side effects, including flushing, vision abnormalities, and a negative interaction with nitrates that are used to treat heart conditions [6]. Early studies with tadalafil used 100mg doses. Lilly researchers discovered that despite being equipotent with sildenafil, tadalafil did not need high doses, and lower doses of tadalafil could be used effectively and with reduced side effects. This discovery was the basis for the ‘684 patent [12]..

There was some debate as to whether the inventive concept included reduced side effects, or was simply a dosage of less than 20mg for the treatment of ED [164]. If the inventive concept was simply the dosage, then it seems to me that it must be obvious, as the ‘784 patent disclosed that dosages of tadalafil including that range would effectively treat ED, so there would be no technical contribution to what was already known. For the invention to be non-obvious, there must be something surprising about the claimed dosage range, such as unexpectedly reduced side effects. In any event, de Montigny J did not need to resolve this debate as he found that the invention was obvious even if the inventive concept included reduced side effects. He found on the facts that in drug development it is standard practice to lower the dosage to reduce side effects [168] and there is a standard process for determining a minimal effective dose [169], so it would have been routine for a skilled person to carry out a dose escalation study starting at 5mg and moving up to 50mg [170]. Even though the optimal dosage regime could not have been predicted in advance, that lower dosages were effective with reduced side effects was the unsurprising outcome of a routine research program that a skilled person would be motivated to carry out [172]. This is a classic case of an invention that is obvious to try. Lilly argued that a skilled person would not have been motivated to try doses of less than 50mg, but de Montigny J rejected this on the facts [165].

Moot NOC Proceedings Remain Moot Despite Impending CETA

Janssen Inc v Teva Canada Ltd 2015 FCA 36

This is an appeal from a decision of Barnes J in an NOC proceeding (2014 FC 1192, not yet publicly available), refusing to grant an order of prohibition [5]. The NOC was issued eight days after the judgment [6]. The patentees appealed four days later. Unsurprisingly, the FCA has dismissed the appeal as moot, in accordance with its long-established jurisprudence.

The FCA noted that while it does have the discretion to hear a moot appeal, to date it has exercised that discretion only once [8], [11]. Janssen’s main argument that the FCA should hear the appeal in this case is that Art 9 bis of the IP chapter of CETA gives all litigants “equivalent and effective rights of appeal” [12]. But as the FCA pointed out, CETA is not yet part of Canadian law [14].

Compound Pre-Judgment Interest Arrives in Canadian Patent Litigation

Eli Lilly and Co v Apotex Inc / cefaclor, 2014 FC 1254 Zinn J [Cefaclor Damages]
            1,133,007 – 1,146,536 – 1,133,468 – 1,150,725 [the Lilly Patents]
            1,095,026 – 1,132,547 – 1,136,132 – 1,144,924 [the Shionogi Patents]

Zinn J’s Cefaclor Damages decision is a major step in taking the law of pre-judgment interest in an economically sound direction. The first step was taken by Gauthier J in the liability phase of this bifurcated action, Cefaclor Liability 2009 FC 991 aff’d 2010 FCA 240. As described in more detail in my blog post on the interest issue in that decision, the common law traditionally prohibited interest and while that prohibition was statutorily reversed those statutes did not allow for compound interest. In Bank of America 2002 SCC 43, (aka Clarica Trust), the SCC recognized that simple interest is not fully compensatory, and consequently, the SCC held that even if compound interest was not available under the relevant statute, it was available under the common law of contract as compensation, so long as it was claimed as such and proven.

Allegation of Non-infringement Need Not Be Put “In Play”

Bristol-Myers Squibb & Gilead Sciences v Teva / efavirenz (NOC) 2015 FCA 3 Near JA: Dawson, Stratas JJA aff’g 2014 FC 30 Barnes J
             2,279,198 / efavirenz / ATRIPLA

In this NOC proceeding, the FCA has affirmed Barnes J’s decision that the patentee failed to established that Teva’s product would infringe the ‘198 patent for a particular crystalline form of efavirenz. The decision at first instance (blogged here) turned entirely on the facts, and the FCA affirmed on the basis that the appellant patentee had not established and palpable and overriding error.

The only point of general legal interest is that the FCA held that when non-infringement is alleged in an NOC proceeding, there is no evidentiary burden on a generic to adduce evidence in order to put that allegation “in play.” It is enough to make the allegation in the NOA, and the burden is then on the patentee to prove infringement on the balance of probabilities [11], [8]. This is in contrast to an allegation of invalidity, in which the generic must adduce some evidence to put the allegation of invalidity into play before the burden shifts to the patentee to disprove invalidity. The reason for the difference is the presumption of validity under s 43(2) of the Act [10].

"That Mode Is Adopted Which Is . . . the Least Burthensome to the Defendant"

Eli Lilly and Co v Apotex Inc / cefaclor, 2014 FC 1254 Zinn J [Cefaclor Damages]
            1,133,007 – 1,146,536 – 1,133,468 – 1,150,725 [“Lilly Patents”]
            1,095,026 – 1,132,547 – 1,136,132 – 1,144,924 [“Shionogi Patents”]

In the liability phase of this bifurcated action, Cefaclor Liability 2009 FC 991 aff’d 2010 FCA 240, Gauthier J held that at least one valid claim of each of the eight patents was infringed by Apotex. Lilly elected damages, which were assessed by Zinn J in the decision at hand. Sunday’s post concerned the misnamed “NIA defence,” which turned entirely on a question of law. Today’s post looks at what I will call “reverse springboard” damages, though that is probably also a misnomer. The question is whether Lilly should be able to claim lost profit damages for sales it would have made in the but for world, even though in the relevant period in the actual world Apotex was selling non-infringing product.

At issue were two set of four patents relating to processes for producing cefaclor. (The so-called “Shionogi patents” had been assigned to Lilly by Shionogi. The different sets of patents related to somewhat different processes.) There were essentially three processes used to make the cefaclor imported and sold by Aptoex: Kyong Bo, Lupin 1 and Lupin 2. The first two processes were infringing, but Lupin 2 was non-infringing. (More precisely, Lilly failed to prove that Lupin 2 infringed and Zinn J took this as tantamount to a finding of non-infringement for the purposes of the damages phase [61].) In the liability phase it was established that the last shipment of infringing cefaclor was received by Apotex on June 3, 1998 [Liability 228-29], [58]. Presumably there was some subsequent period during which Apotex sold infringing product that it had imported prior to that time, but unfortunately, it is not clear from either the liability decision or the damages decision exactly when the last infringing product was sold by Apotex in Canada.

On the question of when Apotex would have entered the market with non-infringing product in the “but for” world, Apotex argued that

proof of what it would have done in the but-for world is established by what it did in the real world. In the real world, when it determined that the process being used infringed the patents, it sought out a non-infringing process and continued selling in the marketplace. [63]

Zinn J rejected this, and held that in the but for world, Apotex would not have been in the cefaclor market under April 19, 2000, when the last of the Shionogi patents expired [70]. It is implicit in this exchange that in the real world, the last infringing product was sold by Apotex prior to that time. My understanding is that Apotex stopped selling infringing product by the summer of 1999 at the latest, so that all product sold in the real world in the period from (at least) the late summer of 1999 to April of 2000 was non-infringing.

So, my analysis of this point proceeds on the basis that Lilly was awarded lost profit damages on sales it would have made in the but for world for a period during which Apotex was selling non-infringing product in the real world.

On its face, Zinn J’s reasoning is based simply on the construction of the but for world on the facts. The main evidence relied on by Apotex to establish that in the but for world it would have used a non-infringing process, at least as of the summer of 1999, is that it did so in the actual world. Specifically, in the real world, Apotex “sought out” a non-infringing process “when it determined that the process being used infringed the patents” [63]. Zinn J accepted this as true [63], but he was not persuaded that that is what Apotex would have done in the but for world. His reasoning is quite brief, but if I understand it correctly, he is saying that Apotex developed an NIA only because it was in the market and wanted to stay in the market. If it had not entered the market in the first place, it would not have had any incentive to develop the NIA [63]-[64]. That is, while it would have been technically feasible for Apotex to have marketed non-infringing product, it would not have been motivated to do so. Instead, it would have stayed out of the market entirely and Lilly would have had the market to itself until the expiry of the last Shionogi patent, which would have allowed Apotex to produce non-infringing product using the Kyong Bo process [69].

This reasoning calls to mind Open Window Bakery 2004 SCC 9, in which the plaintiff had been wrongly dismissed without cause and without notice. The trial judge held that but for the breach of contract, the plaintiff would not have been dismissed, but would have been retained for the entire remainder of the contract term. The defendant argued that on the contrary, but for the wrongful dismissal, the plaintiff would have been dismissed without cause but with notice. (The putative cause for dismissal involved dishonesty, and while the plaintiff had acted inappropriately [2000] OJ 5004 [70], the trial judge held that dishonesty was not established [112]. The trial judge also held that the employees who had made honest mistakes were generously treated by defendant’s CEO [115].)

So, in Open Window Bakery there were two ways in which the defendant might have avoiding wrongdoing: (1) it might have retained the plaintiff for the duration of the contract; or (2) it might have terminated the plaintiff without cause but with notice. The trial judge found that in fact the defendant would have chosen option (1), though option (2) would have been less burdensome. This case presents much the same scenario. Apotex might have avoided infringement by (1) staying out of the market for until the expiry of the patents at issue; or (2) by developing a non-infringing alternative. Zinn J found that in fact Apotex would have chosen option (1), though option (2) would have been less burdensome.

The SCC in Open Window Bakery reversed the trial judge, without disputing his finding of fact, on the basis that as a matter of law, “where there are several ways in which the contract might be performed, that mode is adopted which is . . . the least burthensome to the defendant” [11] (and see similarly [20], [21]). Now, in Open Window Bakery the SCC emphasized this is a principle of contract law, and distinguished it from “a tort-like inquiry as to what would have happened if [the plaintiff] had not breached its contractual obligations to [the defendant]” [19]. But I am not sure that the trial judge’s approach really reflected a tort-like analysis. The tort analogy would be more exact if there were two ways of avoiding liability, and one would have resulted in harm to the defendant. I’m not sure how tort law would handle such a case, but it is not clear to me that it would necessarily be strictly by an inquiry as to what most likely would have happened. I suggest that rather than considering the principle of “least burdensome performance” as being a unique aspect of contract law, it can be explained as a presumption of law regarding the most likely course of action in fact, which simply happens to arise more commonly in contract.

In any event, while patent infringement is often described as a kind of “statutory tort” [10], it is not a tort as such, and the principles of patent damages must be interpreted in a manner that is consistent with the purposes of the Patent Act. The relevant principle is that the patentee should be rewarded commensurately with the social value of its invention, and that is the difference between the value of the invention and the value of the best non-infringing alternative. To posit that Apotex would not have entered with a non-infringing method means that Lilly would be rewarded as if it process were more valuable than it is really is. Consequently, it seems to me that the principle of least burdensome performance should apply, at least presumptively, under the Patent Act as much as in contract.

" 'I Could Have Gone Down Metcalfe Street Instead"

Eli Lilly and Co v Apotex Inc / cefaclor, 2014 FC 1254 Zinn J [Cefaclor Damages]
            1,133,007 – 1,146,536 – 1,133,468 – 1,150,725 [“Lilly Patents”]
            1,095,026 – 1,132,547 – 1,136,132 – 1,144,924 [“Shionogi Patents”]

Zinn J’s Cefaclor Damages decision raises a couple of interesting legal issues related to causation, the first of which is the relevance of a non-infringing alternative to the assessment of damages:

Apotex urges the court to find that if there is a non-infringing alternative [NIA] to the infringing product or process that was available to the infringer in place of the infringing product or process, then, even though the infringer did not employ the NIA in the real world, it must be considered in the but-for world. I shall refer to this as the NIA Defence.[21]

The phrase “NIA defence” is certainly convenient, but it is something of a misnomer, as will be discussed below. Zinn J rejected the NIA defence as a pure matter of law [57]. Zinn J’s conclusion in rejecting the NIA defence was the same as that of Snider J in Lovastatin Damages 2013 FC 751 (blogged here), whom he agreed with [52]. An appeal in Lovastatin Damages was heard in mid-January, and presumably we will be getting the FCA’s view on this issue in due course. As Zinn J’s holding is likely to be overtaken by that of the FCA, I will not try to address every argument on this issue. Instead I will focus on what I see as the intuition behind Zinn J’s rejection of the NIA defence, as I suspect that his intuition is widely shared.

Apotex’s argument was that but for the infringement, it could have would have competed just as effectively with a non-infringing alternative. Lilly’s losses were therefore not caused by the infringement, because it would have suffered exactly the same losses in the but for world in which there was no infringement. Because Zinn J rejected the argument as a matter of law, he did not explicitly address whether Apotex could have established the NIA defence on the facts (though there was some evidence to that effect, as will be discussed my next post.) But by the same token, for the purposes of this analysis we can assume that in fact Apotex would have been able to compete just as effectively using a non-infringing alternative, for at least some of the infringing production.

The essence of Zinn J’s objection to the NIA defence seem to me to be captured in these paragraphs:

[32] I concur with Mr. Creber who said: "I am not aware of any Canadian case that has allowed a tortfeasor, the person who committed the tort, to pretend they could have acted differently whether that be personal injury, whether it be negligence, whether it be patent infringement. ... If I drove my car down Elgin Street and I hit somebody, it would be not open to me to argue, 'I could have gone down Metcalfe Street instead and would have avoided hitting the person'."

[35] In short, the causal connection must be examined in the real world. Damages arise if Lilly proves in the real world that, but for Apotex selling infringing product, it would have made some or all of those sales. The causal connection is not examined in the hypothetical world where the infringer engages in different conduct than that in which it actually engaged. Such an approach permits the wrong-doer to escape all responsibility for its conduct.

That is, the NIA defence would allow a wrongdoer to say “But for the wrong, I would have acted so as to avoid the wrong, and so I should escape all responsibility.”

Claim Defined in the Alternative: A Circle of Logical Contradiction

Eli Lilly Canada Inc v Mylan Pharmaceuticals ULC (NOC) 2015 FC 17 de Montigny J
            2,226,784 – tadalafil– CIALIS

In law we are accustomed to issues with two conflicting lines of authority. But when it comes to s 27(5) of the Act, which concerns claims framed in the alternative, we have one single line of authority – that ends of up contradicting itself, like a snake swallowing its own tail. There are two questions: (1) when a claim is framed in the alternative, so that s 27(5) applies, does the validity of the alternative in issue depend on the validity of the other alternatives?; (2) when a claim is not framed in the alternative, so that s 27(5) does not apply, does the validity of the alternative in issue depend on the validity of the other alternatives ? There are four possible answers to these two questions, and now, with de Montigny J’s Tadalafil decision, the courts have given all four answers, all based on one leading authority.

Date for Assessing Obviousness-Type Double Patenting Is Priority Date of Earlier Patent

Eli Lilly Canada Inc v Mylan Pharmaceuticals ULC (NOC) 2015 FC 17 de Montigny J
            2,226,784 – tadalafil– CIALIS

The claims at issue in this NOC proceeding were to tadalafil (CIALIS) for the treatment of ED in men, specifically by oral administration [18]-[25]. As discussed yesterday, de Montigny J rejected Mylan’s utility attack.

The second substantive issue was obviousness type double-patenting over the 2,181,377 patent. Smooth muscle tissue, including heart and vascular muscles, as well as penile tissue, is relaxed by the so-called NO/cGMP pathway, with the end result that increased concentration of cGMP causes the smooth muscle tissue to relax [7]. Relaxation of penile tissue induces an erection. A class of enzymes known as PDEs break down cGMP. A compound that inhibits PDE can therefore prevent the breakdown of cGMP, resulting in increased concentration of cGMP, relaxation of the smooth muscle tissue, including penile erectile tissue. This was all known before sildenafil and tadalafil were discovered to treat ED. The ‘377 patent is a compound claim to tadalafil, and it discloses that tadalafil is a potent and selective PDE_V inhibitor. The essential obviousness argument in this proceeding (as well as in various earlier proceedings regarding sildenafil), was that the information regarding the NO/cGMP pathway, combined with the knowledge that tadalafil was a selective PDE_V inhibitors, made it obvious that tadalafil would be effective in treating ED.

The main legal question on this issue turned on the fact that the ‘377 patent, which revealed that tadalafil is a selective PDE_V inhibitor, was not published until 27 July 1995, two weeks after the claim date of the ‘784 patent (14 July 1995). Thus the ‘377 patent could not be raised in a straight obviousness argument, because under s 28.3 obviousness is assessed in light of information disclosed before the patent's claim date. 

Mylan therefore relied on obviousness-type double patenting. The key contested legal issue was whether the date for assessing obviousness type double-patenting should be the priority date of the ‘784 patent or the priority date of the ‘377 patent [134]-[135]. That is, in assessing whether the ‘784 patent is obvious in light of the ‘377 patent, should the art that arose after the ‘377 date, but prior to the ‘784 date, be taken into account?

de Montigny J held that the priority date of the earlier, ‘377 patent, was appropriate, for two main reasons. First:

[134] If, as Mylan would have it, the relevant date was to be the priority date of the second patent (in this case, July 14, 1995), the obviousness-type double patenting analysis would morph into a pure obviousness analysis, with the added benefit that the timing requirements of section 28.3 of the Patent Act would be circumvented.

This strikes me as a very strong point. The judicially created obviousness type double-patenting cannot be used to do an end-run around a clear statutory provision.

His second point was that the rationale for the doctrine of obviousness type double-patenting is to prevent evergreening of the earlier patent by a claim to subject matter which makes no further inventive contribution [142]. Consequently, the question is “whether the claims of the ‘784 Patent disclose novelty or ingenuity over the ‘377 Patent” [133]. If it does, then the later expiry date of the second patent is not impermissible evergreening, but a reward for a further inventive contribution. That point also strikes me as compelling.

Having decided that the appropriate date was the ‘377 priority date, de Montigny J held that it was clear that there was no obviousness type double-patenting. The fact that tadalafil was a PDE inhibitor, and was useful for relaxing smooth muscle tissue, did not make it obvious that it would be useful for treating ED, because prior to the sildenafil patent and related publications, everyone had thought that relaxing smooth muscle tissue would cause ED, rather than treat it, by generally lowering the patient’s blood pressure [136]. The breakthrough that lead to the realization that tadalafil (and sildenafil) could be used to treat ED was the discovery that the the main PDE activity in human penile tissue is due to a particular type of PDE, PDE_V, so that oral administration of PDE_V would relax penile tissue but not vascular tissue [109]. That was far from obvious at the priority date of the ‘377 patent.

While important, the question of the appropriate date for assessing obviousness type double-patenting was not determinative, because de Montigny J also held on the facts that the use of tadalafil to treat ED would not have been obvious over the ‘377 patent and the common general knowledge even at the priority date of the ‘784 patent [149], for essentially the same reason: the state of the art had not changed significantly in the interim, and even at that later date it was still thought that oral administration of any PDE inhibitor, including a PDE_V, inhibitor, would result in systemic hypotension.

Utility of CIALIS Patent Upheld on the Facts

Eli Lilly Canada Inc v Mylan Pharmaceuticals ULC (NOC) 2015 FC 17 de Montigny J
            2,226,784 – tadalafil– CIALIS

In this NOC proceeding, de Montigny J held that Lilly had established that its ‘784 patent was valid in the face of Mylan’s allegations of lack of utility and obviousness-type double patenting. The utility issue turned on the facts, and Lilly won comprehensively, so that alternative constructions of the promise of the patent were largely rendered moot. Perhaps the point of most general interest is that de Montigny J rejected the proposition that the word "treatment" implies lack of undue side effects. The obviousness-type double patenting issue raised one novel point of law, namely the appropriate date for assessing obviousness in the context of double patenting. Tomorrow’s post will look at that question. Perhaps the most interesting legal question raised by this case, albeit tangentially, turned on the interpretation of s 27(5), which provides that when a claim is framed in terms of alternatives, each alternative is to be considered a separate claim. A third post will discuss that issue.

The claims at issue were to tadalafil and 3-methyl tadalafil, or a pharmaceutical composition comprising those compounds, for the treatment of ED in men, specifically (Claim 18) by oral administration [18]-[25]. The argument relating to utility turned on the promise of the patent. The contentious issues were whether the patent merely promised the treatment of erectile dysfunction (ED) by use of tadalafil, as Lilly argued, or whether it also included efficacy in oral administration [76], and / or lack of toxicity [87], as argued by Mylan. Some interesting points of law were raised tangentially, but were largely rendered moot by de Montigny J’s holdings on the facts.

A Rule Without a Principle: Patentability of Methods of Medical Treatment

AbbVie Biotechnology Ltd v Canada (Attorney General) 2014 FC 1251 Kane J

2,385,745* – anti-TNF-α antibodies / HUMIRA dosage regime

Kane J’s Humira dosage regime decision is the latest chapter in the continuing saga of the patentability of methods of medical treatment. While Kane J’s holding that the claims in question are patentable is defensible, I am not persuaded by her view that the case law is consistent [84], as there is support in the case law for the opposite result. So far as I can tell, the case law is incoherent in the sense that it cannot be explained on the basis of any unifying principle, and progress in this area of the law will not be possible until that fact is generally acknowledged.

When is a New Drug Submission "Administrative"?

Pfizer Canada Inc v Canada (Attorney General) 2014 FC 1243 Gleason J
            2,409,059 – exemestane – AROMASIN.

Yesterday’s post discussed Gleason J’s holding that the standard of review of the Minister’s interpretation of s 5(1) of the PM(NOC) Regulations is correctness. Today’s post looks at the substantive question: when a first generic has received an NOC, is a second generic which licenses from that first generic subject to s 5? If the answer is yes, this means that a patentee can decide whether to respond to each NOA in light of the threat it perceives from the particular generic; if the answer is no, a patentee must respond to every NOA it receives, or take the risk that the generic in question will subsequently license. As a matter of law, this resolution of this question turns on the interpretation of the word “submission” for an NOC in s 5(1).

To recap the facts, GMP filed an ANDS with the Minister with respect to exemestane using Pfizer’s exemestane product, AROMASIN, as the reference product [45]. GMP served Pfizer with an NOA, and Pfizer chose not to respond. An NOC was then issued to GMP. On the same day, Health Canada also issued an NOC to Teva with respect to exemestane. This NOC was granted on the basis of an “administrative” ANDS filed by Teva, based on a licensing agreement with GMP. The NOC issued to Teva also shows AROMASIN as the Canadian Reference product [46]. Teva never served an NOA on Pfizer.

Teva undoubtedly did file a submission with Health Canada requesting an NOC, and the NOC was granted. The reference product was AROMASIN, and it is consequently clear on the authorities, and now on the face of the Regulations, that Teva’s ANDS compared its product “directly or indirectly” with Pfizer’s product. The only argument, then, is that the ANDS submitted by Teva is not a “submission” for the purpose of the Regulations. As noted yesterday, the AG carried the argument on this question.

The AG’s first argument was that the purpose of the Regulations is to allow the “early working” by a generic company of a patented drug, and Teva did not take advantage of the early-working exception – GMP did – so therefore, that under a purposive approach, Teva’s submission is not a “submission for an NOC.” Gleason J rightly rejected this purposive argument, noting that “The Regulations exist not only to allow generic companies to early work patented medicines to develop generic formulations and to have them ready as soon as possible but, also, to balance these interests with those of the patentee in obtaining protection for innovations that are legitimately patented” [133]. As noted in yesterday’s post, the proposition that the Regulations implement a balance is very well established. Moreover, the AG’s submission on the purpose of the provision seems to miss the point. S 5(1) does not implement the early working exception at all, which is found in s 55.2(1) of the Act. S 5(1) strikes the other half of the balance, namely the protection of the patentee’s interests. The Regulations as a whole strike the balance alluded to by Gleason J, and the purpose of s 5(1) in particular is almost the opposite of that suggested by the AG.

The AG’s next submission was in effect that the case law has established that not all submissions are “submissions” for the purpose of s 5(1); in particular, “administrative” submissions are not considered “submissions” which trigger s 5(1) [129]. The question then is what makes a submission an “administrative” submission?

The AG relied in particular on a series of cases holding that certain supplemental NDSs, specifically, those required where there is a change in the name of a drug, a drug manufacturer, or a change of manufacturing site, are not “submissions” for the purpose of submitting a patent list under s 4: see eg Hoffman-LaRoche 2005 FCA 140 [25]. Gleason J held that those cases were not relevant, on the basis that the concern in those cases – that the patentee should not be able to extend its entitlements under the Regulations with administrative filings – is very different from concerns as to whether the patentee should be required to address a particular generic [143]. While this strikes me as sound as a matter of purposive analysis, the textual argument that the word “submission” should be interpreted in the same way in both s 4 and s 5 is strong. But even if we accept that textual point, the cases cited are not particularly helpful, as the types of changes they discussed were different, and arguably less significant, than a submission by an entirely different party based on a licence.

The AG then appealed to the GlaxoSmithKline 2004 FC 1302 decision, in which Lemieux J held that Health Canada’s Name Change Policy did not trigger s 5. The product in GSK was a salbutamol inhaler. GSK has obtained a NOC for its salbutamol inhaler product, VENTOLIN, and it also obtained a formulation patent which it listed against that product. 3M obtained an NOC for its its salbutamol inhaler product, AIROMIR, on the basis of an entirely separate NDS. 3M also obtained a formulation patent which it listed against its product [13]. 3M and Apotex then entered into a licensing agreement permitting Apotex to sell 3M’s product under Apotex’s name. Apotex sought an NOC based on that agreement. GSK argued that Apotex’s submission triggered s 5, requiring Apotex to address GSK’s patent.

Gleason J held that GSK was distinguishable because Apotex was not required to address GSK’s patents because it was not using GSK’s product as a reference. That is, Apotex was not comparing its product, directly or indirectly, with GSK’s [142]. In this respect, GSK anticipates Biolyse 2005 SCC 26.

While I agree that GSK is strictly distinguishable for that reason, the fact that the comparison was indirect was something of a secondary consideration in Lemieux J’s decision. He also addressed the name change issue. On that point, Lemieux J’s decision in GSK turned on the fact that in its submission, Apotex certified that

...all aspects of the submission pertaining to: Apo-Salvent CFC Free submitted by: Apotex Incorporated are identical to Airomir... submission(s) except for a change in the manufacturer/sponsor's name and/or product name and that the product will be manufactured in the same location with identical specifications and procedures". [Lemieux J’s emphasis] [20]

Lemieux J held that the administrative NDS was not a submission because the purpose of the Food and Drug Regulations, which impose the requirement for an NOC, is to ensure the safety and effectiveness of drug products on the Canadian market [66]. The changes in the submission by Apotex were not relevant to the safety and effectiveness of the drug in question – it was “identical” to 3M’s product down to the point of being made in exactly the same plant – so the application for an NOC should not be seen as a “submission” for the purposes of the Food and Drug Regulations [68]. Moreover, because of the linkage between those Regulations and the PM(NOC) Regulations, the meaning of “submission” in the PM(NOC) Regulations should be given a similar interpretation [64].

Lemieux J’s purposive analysis strikes me as sound. In this case, if Teva would be manufacturing in a different plant from GMP, then GSK would be clearly distinguishable, and indeed, it strongly implies that the submission would not be purely administrative in that case. From an NOC perspective, the argument is reinforced; particularly in the case of a formulation patent (such as the 059 patent) the plant in which the product is made might be very significant in a patentee’s decision whether to address an NOA, because the likelihood of infringement would be directly affected. On the other hand, if Teva would be purchasing its product in final form from GMP, the argument that the filing was administrative is much stronger. GSK would still be distinguishable, because of the comparison point discussed at the outset, but the question would be very different. The question would be whether the patentee would be entitled to decide whether to challenge a particular NOA based on its assessment of the business practices of the generic in question, rather than the technical aspects of the product.

It is not clear to me which scenario is at issue in Exemestane. The nature of the license between GMP and Teva is not spelled out, and are details of Teva’s ANDS are not provided, so it is not apparent whether it has a certification similar to that emphasized by Lemieux J in GSK. Nor is s 3.4.1 of the PM(NOC) Guidance Document clear, at least to me. It applies only when the licensee seeks to sell the “identical” drug, but that term is not defined in that Guidance document. The policy on Changes in Manufacturer’s Name and/or Product Name does specify that for the purposes of that policy, a drug is considered identical only when the conditions of manufacture and sale are identical, but it is not obvious to me that that definition is intended to apply across all technical guidance documents.

Gleason J also relied on Nu-Pharm 1 (1997), 73 CPR (3d) 510, [22], aff’d (1998), 80 CPR (3d) 74 (FCA) and Nu-Pharm 2 [1999] FCJ No 1825, aff’d (2000), 5 CPR (4th) 138, holding that these cases were not distinguishable. I don’t know if I agree. In the Nu-Pharm decisions Generic 1 had obtained an NOC using a patentee’s product as a reference product, and Generic 2 sought to avoid having to address the patents by using Generic 1's product as a reference product. The FCA held that Generic 2 could not avoid addressing the patents by this strategy. This has been legislatively affirmed by the reference to an “indirect” comparison in the current s 5(1).

Gleason J held that the Nu-Pharm decisions were not distinguishable because “In both Nu-Pharm cases the generic company, just like Teva, had acquired the right to produce the drug in question under a licence from another generic company” [141]. However, I could not find any reference to a licence in any of the Nu-Pharm decisions. (And I don’t really see what kind of proprietary interest Generic 1 might have had in the right to produce the drug, so it’s not clear to me why Generic 2 would have required a licence.) So it is not clear to me if the Nu-Pharm cases are distinguishable. If, in this case, Teva intends to purchase the final product from GMP, then it seems to me that the cases are distinguishable, because it appears that in the Nu-Pharm cases Generic 2 was going to manufacture the product itself. On the other hand, if Teva intends to manufacture at a different plant than GMP, then I agree with Gleason J the cases are not distinguishable. That this is the case is suggested by Gleason J saying that Teva acquired “the right to produce the drug in question” under licence from GMP, implying that Teva, not GMP will be the manufacturer. But as discussed above, the case as a whole is not clear on this point.

In conclusion, some facts that seem to me to be quite important are simply not clear to me, and consequently I cannot assess the merits of the decision. While the facts in question were no doubt clear to the parties and to Gleason J, for the sake of guidance for future applicants and litigants, I hope that on the inevitable appeal, the FCA will clarify these issues or explain why the questions I have discussed are not relevant.