The Relationship Between Utility and Obviousness

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

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

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

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

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

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

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

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

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

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

Post-Judgment Interest: Principles and Practice

Astrazeneca Canada Inc v Apotex Inc 2011 FC 663 Hughes J 

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

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

“Final” means Final

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

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

Issue Estoppel and Foreign Proceedings

Astrazeneca Canada Inc v Apotex Inc 2011 FC 862 Hughes J

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

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

Evergreening and Accounting of Profits

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

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

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

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

What is a “Scintilla” of Utility?

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

2,209,735 – atomoxetine – STRATTERA

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

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

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

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

2,209,735 – atomoxetine – STRATTERA

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

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

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

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

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

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

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

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

Mootness on Appeal

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

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

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

The Incentive Effect of Patents in Pharmaceutical Research

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

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

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

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

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

Irreparable Harm in Interlocutory Injunctions

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

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

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

The Role of the Merits in an Interlocutory Injunction

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

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

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

Will Microsoft v i4i Influence Canadian Law?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

No New Patent Cases

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

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

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

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

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

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

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

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

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

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

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

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

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

“Comprising”

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

Purdue Pharma sought to list patent 2,098,738 against TARGIN under the PM(NOC) regulations. TARGIN is a controlled release combination of two active ingredients, oxycodone and naloxone. The ‘738 patent claims a controlled release oxycodone formulation “comprising” oxycodone in a matrix. None of the claims expressly mention naloxone. Does the ‘738 patent encompass TARGIN? If it does not, then a generic version of TARGIN cannot infringe, and the ‘738 patent is not eligible for listing. That question, which turns on the meaning of “comprising”, is the subject of this post. Whether the ‘738 patent would be eligible for listing even if the TARGIN did potentially infringe is a separate question which will be discussed in a subsequent post.

Normally “comprising” defines an open-ended list which does not exclude additional unrecited elements or method steps. On this standard interpretation, a formulation of TARGIN which used the claimed controlled released technology would infringe the ‘738 patent. However, Crampton J accepted the submission of the OPML that in this patent, “comprising” was a limiting term, from which is follows that TARGIN would not infringe.

No Section 8 Damages for Permanent Loss of Market Share

Teva Canada Ltd v Sanofi-Aventis Canada Inc / ramipril (NOC) 2011 FCA 149 Dawson JA: Noël JA; Sharlow JA dissenting, affm’g 2010 FC 1210 Simpson J, affm’g 2010 FC 150 Milczynski Pr

In Sanofi-Aventis / ramipril 2011 FCA 149 Dawson JA, in a brief decision from the bench for herself and Noël JA, affirmed the FCA’s holding in Merck Frosst Canada Ltd v Apotex Inc / alendronate (NOC) 2009 FCA 187 that section 8 of the NOC regulations does not permit recovery of losses – in particular loss of market share – suffered after the expiry of the statutory stay, even if those losses were caused by the stay. Sharlow JA in dissent was of the view that Merck Frosst was wrongly decided [14], while the majority felt it should not be disturbed [5]. (Note that Noël JA wrote for the Court in Merck Frosst.)

Sharlow JA dissented on the basis that “[t]he damages contemplated by section 8 are intended to be analogous to the undertaking a party is normally required to offer when seeking an interlocutory injunction in ordinary commercial litigation,” and “an undertaking in damages is normally broad enough to cover all losses resulting from the injunction” [12]. There is a great deal to be said for Sharlow JA’s position as a matter of principle. On the other hand, while section 8 is analogous to an undertaking, it is not one. The rights of the second person are defined by the regulations, and, as the various RIASes make clear, the scheme as a whole is intended to "balance" enforcement of patent rights with encouragement of generic entry. Thus while Sharlow JA at [14] criticized as a "narrow" and "literal" interpretation of the relevant provision in Merck Frosst, it is quite reasonable to suppose that an interpretation which is in some ways unprincipled may be required to give effect to the precise balance sought by the legislature. This was in effect the position taken by the FCA in Merck Frosst at [101-102] in having regard primarily to the text rather than principles of causation in interpreting the amended section 8.

Guidance for Pleading Early Infringement

Apotex Inc v Allergan Inc / gatifloxacin 2011 FCA 134

Pharmaceutical patentees view damages as a poor substitute for a permanent injunction, and are therefore anxious to bring an action against a generic producer as soon as possible. The question of what acts constitute infringement, or are sufficient to support a quia timet action, are therefore important. The FCA decision in Allergan, affirming a decision of Beaudry J refusing to strike Allergan’s statement of claim, helps to fill in this picture.

The Federal Courts have consistently been unwilling to allow an infringement action to be brought simply on the basis that the generic has applied for or obtained an NOC. In Allergan the Court of Appeal stated that “the mere fact that a defendant pharmaceutical company has sought regulatory approval to market a medicine does not by itself support an action for patent infringement” [4]. This point had not previously been settled (see AstraZeneca 2010 FCA 112 [8-9], affm’g 2009 FC 1209), and while this statement was strictly obiter, it is consistent with the thrust of the prior case-law. The point must now be considered settled.

However, in Allergan the patentee did not rely on the generic having obtained an NOC. Rather, the main thrust of its allegations was that Apotex had obtained a tentative approval for a US ANDA, and that the ANDA indicated that Apotex had made infringing product in Canada, and that it had and intended to import infringing product into Canada for formulation and export to the US: see the decision appealed from, T-1267, 9 Nov 2010. Consequently, it was not a quia timet action at all: “[t]he claims of past and continuing infringement support the claim of future continuing infringement” [14].

This point is not directly relevant to the paradigmatic case in which the patentee seeks to prevent manufacture and sale into the Canadian market. Of more general interest is the holding respecting particularity of the pleading. The courts have consistently been unwilling to allow an action based on a bald general allegation of infringement, on the basis that an action cannot be allowed to serve as a fishing expedition: the leading case is AstraZeneca (see esp. 2009 FC 1209 [17]) and see Eli Lilly / olanzapine 2011 FC 255 [8-9], also striking the statement of claim. The particulars pleaded in Allergan did go beyond those pleaded in either AstraZeneca or Eli Lilly, and the FCA held at [8] that it was reasonably open to the trial judge to hold that they were adequate. Thus we now have case-law on both side of the line separating adequate from inadequate pleading of material facts.

In Allergan Apotex also argued that Allergan’s statement of claim should be struck on the basis that the regulatory use exception of s. 55.2(1) applies, as in Eli Lilly. However, as the FCA pointed out [12-13], Allergan is distinguishable as in Eli Lilly “there is absolutely nothing pleaded that is not part of the regulatory requirements” (2011 FC 255 [28]), while in Allergan the allegations clearly went beyond those requirements. The FCA also stated that “the existence of even a strong defence to a claim does not justify an order striking the claim” [9]. This is not entirely easy to reconcile with Eli Lilly, but in any event, the FCA relied mainly on the differences in the allegations.

Hiatus until May 11

I will be grading exams for the rest of the week, and then off for a two week vacation. I expect to resume blogging on May 11th.

Validity as a Defence to a Section 8 Action

Apotex Inc. v. Shire Canada Inc. / modafinil (NOC) 2011 FC 436 Tabib P

The modafinil litigation raises the question of 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. Shire is a licencee under the relevant patent and holds an NOC. The patent is owned by Cephalon. Apotex initiated NOC proceedings against Shire and was successful: 2008 FC 538. Apotex then brought an action against Shire for section 8 damages. In the meantime, Cephalon has filed an action for infringement against Apotex. In 2010 Shire sought to amend its statement of defence to add a defence to the effect that if Cephalon is successful in its action against Apotex, then Apotex should not be allowed to recover against Shire under section 8. It is important to note that at that time Shire did not propose to bring any evidence on the issue of validity and infringement; it wished to rely entirely on the outcome of the Cephalon action. This amendment was not permitted (2010 FC 828 affm’d 2010 FC 1001), on the basis that the Shire had not pleaded any material facts on which the court could make any direct determination. If Shire’s defence had been permitted, the outcome of the Shire action would depend entirely on the outcome of the Cephalon action, which is completely independent. In this motion, Shire sought to amend its statement of defence to plead directly that Apotex infringes. Prothonotary Tabib J dismissed this motion on the basis the Shire had not sought this amendment in a timely manner [40]. We therefore do not have any indication on the merits as to whether such a defence would be permitted. However, the modafinil litigation shows that there is no satisfactory answer.

The Court’s holding in 2010 FC 1001, that for procedural reasons Shire cannot be allowed to rely on the outcome of the Cephalon litigation, is entirely reasonable. The parties in the Shire litigation have no control over the Cephalon litigation, which might be prolonged indefinitely. But if Shire had raised the defence in a timely manner, and the amendment sought in this decision had been allowed, this would require an entirely separate determination of the validity of the modafinil patent as part of the section 8 action, in addition to the determination originally made as part of the main NOC proceeding, and also in addition to determination to be made in the Cephalon action. It is surely a waste of resources to have the same patent litigated three times against the same party.

In my discussion of the levoflaxin litigation I suggested that a subsequent finding of validity would not bar a section 8 claim in any event because of the “no reach back” rule articulated in Apotex v Syntex / naproxen (NOC) 2010 FCA 155. Whether that suggestion is correct remains to be seen. If it is, then the generic will be entitled to damages for having been kept out of a market that it had no right to enter, which is not satisfactory. If both the NOC litigation and the subsequent infringement action were between the same parties, as is often the case, then a cure for this might be to allow the patentee to claim reimbursement of the section 8 damages as part of its damages in the infringement action. Apart from any conceptual problems this might raise, the modafinil litigation shows that this is not a general solution, because the here parties are different; payment by Shire under section 8 is not a loss to Cephalon.

If this analysis is right, it is difficult to see how even an amendment to the NOC regulations could help matters. Perhaps there is some creative solution to the problem that is not apparent to me. But for now it looks as though this is another aspect of the problems caused by the separation of the statutory stay under the NOC regulations from the underlying infringement action: see here, here and here, for previous posts on this issue.

Payment of Fees by the Wrong Agent – A Glimmer of Hope

Excelsior Medical Corporation v. Canada (Attorney General) 2011 FC 407 Hughes J

Hot on the heels of Unicrop 2011 FCA 55 affm’g 2010 FC 61 (discussed here), Excelsior Medical is another case in which an applicant changed patent agent but failed to notify the Patent Office of the change, with the result that maintenance fees were not tendered by the “authorized correspondent,” as required by Rule 6(1), prior to the expiry of the grace period for reinstatement of an application that has been deemed abandoned for failure to pay those fees. Unicrop held that the Commissioner is entitled to refuse payment, with the result on the facts that the application was held to be incurably abandoned.

Excelsior Medical provides a slender ray of hope for such an applicant. Where in Unicrop the Patent Office had refused the fees paid by the wrong agent, in Excelsior Medical the Patent Office accepted the fees and sent a notice to the agent of record stating that the application had been reinstated [6]. This was apparently an automatic response, generated without substantive review. On review, the Patent Office sent a further letter rescinding the reinstatement, on the basis that the fee should not have been accepted [4.12]. By the time this letter was received, the grace period had expired. Hughes J held that when the Commissioner receives and acts upon a communication, the application is reinstated, and the Commissioner cannot “un-perform” that function [38], [41]. (Unfortunately for the applicant, on the facts the new agent had subsequently requested and accepted a refund, and the application then became incurably dead [42].) 

While this result is fair and reasonable, it is perhaps difficult to reconcile with the mandatory language of Rule 6(1), which states that the Commissioner “shall only have regard to communications from[] the authorized correspondent.” But a line must be drawn somewhere; it seems inconceivable, for example, that a patent could be declared invalid ab initio after having been granted and enforced, if it were discovered that fees had been paid by the wrong agent at some point during the application process. On the modern approach to statutory interpretation, the text must be interpreted in light of its purpose, and not in a purely literal fashion.

Hughes J also indicated that if detrimental reliance had been established, which it had not been on the facts, he would have considered the possibility of ordering equitable relief. The difficulty with this thought is that both levels of court in Unicrop refused to invoke equitable principles to order the reinstatement of the application despite expiry of the deadline: “equitable relief cannot be invoked in order to counter the application of a clear statutory rule” [FCA 38].

In the end, Hughes J did his best to temper the application of Rule 6(1), but all he could do was to provide a narrow window that will benefit few applicants. The root of the problem lies with the rule itself.

Obvious to Try – In Two Jurisdictions

Merck Sharp & Dohme Corp v Teva UK Ltd [2011] EWCA Civ 382 (08 April 2011) affm’g [2009] EWHC2952 (Pat)
Merck & Co. Inc. v Apotex Inc. / cosopt (NOC) 2010 FC 1042 O'Reilly J

In 2010 FC 1042 O'Reilly J refused an order of prohibition on a generic version of Merck’s Cosopt product for the treatment of glaucoma, on the basis that the co-formulation of dorzolamide and timolol claimed in Merck’s patent 2,065,965 was obvious. A prior art publication by Merck’s own researchers (the “Nadin” article) disclosed that dorzolamide and timolol had an additive effect, but did not specifically disclose co-formulation, as opposed to sequential administration. The question was whether co-formulation was obvious in light of that disclosure. O’Reilly J applied the “obvious to try” analysis. It seems (from the brief reasons) that it was conceded that it was obvious to try, and O’Reilly J found that there were no significant hurdles to be overcome – “co-formulation was routine” – and the co-formulation was therefore obvious. In [2009] EWHC 2952 (Pat) Floyd J held the same in an infringement action on the corresponding European patent patent EP 0 509 752 B1 for essentially the same reasons. (The main difficulty is that the two products perform optimally at different pH, so some experimentation was needed in arriving at an appropriate compromise, but there was no real difficulty in so doing.) Floyd J's decision was affirmed by [2011] EWCA Civ 382, which was released last Friday.

So far, so good. OReilly J’s decision is a good illustration of the application of the “obvious to try” analysis to hold that a claim invalid, and it is a nice bonus to see courts in different jurisdictions coming to the same conclusion on the same facts.

I have one quibble with the EWCA decision. Merck decided not to argue that the leap from co-adminstration to co-formulation was qualitatively inventive; instead it argued that the time between the publication of the Nadin article and the priority date was so short (six days) that the skilled team would have been unable to carry out the requisite experiments, routine though they might be [EWCA 31]. The EWCA rejected this, saying, inter alia, “If by reference to the relevant state of the art the invention is obvious then it matters not that it may take time to perform the necessary routine tests. It is a matter of simple comparison between the relevant art and the claimed invention” [36]. It is questionable whether this statement is consistent with Canadian law, as the Supreme Court in Sanofi [69] held that it is relevant to ask “[w]hat is the extent, nature and amount of effort required? Are routine trials carried out or is the experimentation prolonged and arduous, such that the trials would not be considered routine?” It is not merely a simple comparison between the relevant art and the claimed invention. In Canadian law the quantity of experimentation – the “amount of effort” – is relevant, not only the quality. As the Sanofi excerpt indicates, trials that are prolonged and arduous will not be considered routine, even if individually they may not require special skill. This is consistent with the view that a “patient searcher is as much entitled to the benefits of a monopoly as someone who hits upon an invention by some lucky chance or inspiration" American Cyanamid Co. v Berk Pharmaceuticals Ltd., 1976} R.P.C. 231, at 257, quoted with approval in Farbwerke Hoechst Aktiengesellschaft Vormals Meister Lucius & Bruning v Halocarbon (Ontario) Ltd. [1979 2 SCR 929. (This is not to say that the co-formulation in this case should have been held to be inventive in Canadian law. The basis for the decision of O’Reilly was there was no evidence of undue experimentation, and Floyd J’s decision might have been upheld on the same basis.)

This might seem like an overly technical reading of the EWCA decision, and perhaps it is. After all, the mere fact that it takes time to perform routine trials (if a fixed incubation period is required for what is otherwise a simple test, for example) would not render an invention obvious in Canadian law. However, the English courts have more than once indicated that routine work, no matter how prolonged and arduous, cannot amount to invention. This was expressed succinctly by Aldous LJ for the CA in Biogen Inc v Medeva PLC Court of Appeal (Civil Division) [1995] FSR 4: “There is no idea, no principle. A mere commercial decision is not an invention.” This was reversed by the House of Lords on the facts, [1996] UKHL 18 [53] but apparently agreeing with Hobhouse LJ on this point. My own view is that the Canadian position is preferable as a matter of policy, as it is more consistent with the incentive rationale for patent protection. But it should in any event be recognized that there is a principled point of difference here, and UK law should not be blindly followed.

Stay of Execution Pending Appeal

Phostech Lithium Inc v Valence Technology, Inc 2011 FCA 107 Pelletier JA

In Phostech v Valence 2011 FCA 107 Pelletier JA granted a stay pending appeal of the judgment of Gauthier J in 2011 FC 174. It is interesting to contrast this decision with that of the EWCA in Virgin Atlantic v Premium Aircraft [2009] EWCA Civ 1513 Jacob LJ: Patten LJ, Kitchin J granting a partial stay (a “carve-out”) pending a decision on an application for leave to appeal to the UK Supreme Court.

The major difference is that the FCA in Phostech applied the Cyanamid threshold of “a serious issue to be tried” on the merits portion of the test, while the EWCA did not, saying:

22 It should be noted the question is not the same when one is considering what to do on an application for an interim injunction pending trial. In that case the patentee has yet to establish his right, whereas after successful trial he has prima facie done just that.

Surely this is a compelling argument. The reason given by Lord Denning in American Cynamid for lowering the old threshold of “a prima facie case” to “a serious question to be tried” was that “[i]t is no part of the court's function at this stage of the litigation to try to resolve conflicts of evidence on affidavit as to facts on which the claims of either party may ultimately depend nor to decide difficult questions of law which call for detailed argument and mature considerations. These are matters to be dealt with at the trial" [1975] AC 396, 407. It follows directly that once the matter has been decided at trial, it is legitimate to consider the merits. Indeed, this was the position taken by the Supreme Court in Laboratoire Pentagone Ltée v. Parke, Davis & Co. [1968] SCR 269, a patent case in the Supreme Court refused a stay of execution pending appeal:

The burden upon the appellant is much greater than it would be if the injunction were interlocutory. In such a case the Court must consider the balance of convenience as between the parties, because the matter has not yet come to trial. In the present case we are being asked to suspend the operation of a judgment of the Court of Appeal, delivered after full consideration of the merits.

This argument is particularly compelling where the appeal turns on a point on which the trial judge is owed deference. But even on a point of claim construction, the point argued in Phostech [2], the considered opinion a trial judge after a full trial on the merits, must surely count for something. In Laboratoire Pentagone [1968] SCR 307 the SCC ultimately reversed the Quebec Court of Appeal on a point of law; this implies that the Court did not view the the nature of the point on appeal as being relevant to the test for a stay.

Overview of US FTC: The Evolving IP Marketplace

US Federal Trade Commission, "The Evolving IP Marketplace: Aligning Patent Notice and Remedies with Competition,” (March 2011)

I have finally had time to read the most recent IP-related report from the US Federal Trade Commission, on "The Evolving IP Marketplace." In contrast to the 2007 Report on “Antitrust Enforcement and Intellectual Property Rights” which considered the intersection of IP law and competition law, this Report, like the 2003 Report “To Promote Innovation” focuses directly on patent law, on the view that a properly functioning patent system promotes competition, but a defective patent system will do the opposite. This is a trite observation from a patent perspective, and the implicit justification for FTC Reports on patent law is that it has a unique expertise in the economics of competition policy. In my view, that premise is borne out by the latest Report, which very interesting and balanced look at two main areas of patent law: the “notice” function of patents, and patent remedies. (The 2003 Report focused on patent quality, especially obviousness.) The Report is based on hearings and a workshop, as well as written submissions and independent research.

The Report begins with a descriptive survey of "the evolving patent marketplace" (ch 2). This focuses on how ex post licencing can impede innovation. If a firm is able to negotiate for patent rights before it has invested in creating or commercializing the technology, then the licence fee will reflect the value of the patented technology as compared with the non-infringing options available to the firm. However, if the firm licenses only after it has invested substantially in product development, the cost of the licence reflects not just the value of the patented technology, but also the sunk costs that would have to be abandoned if the activity were enjoined. This can impede innovation as a firm that cannot determine at the outset whether its activities will infringe must discount its anticipated profits to allow for the possibility of an ex post infringement action. Ex post licensing is not categorically undesirable, as the possibility of such an action is the major inducement to conduct patent clearance in the first place. However, when the patentee’s strategy is to avoid ex ante licensing in order to extract licence fees that are greater than the value of the technology, the effect is to impede both competition and innovation. I like to refer to “opportunistic ex post licensing” to refer to the latter strategy.

The take-home message is that the ability to conduct effective patent clearance is crucial to a sound patent system. This depends on the efficacy of the notice function of patents; the ability of a firm to predict what activities will infringe by discovering and interpreting relevant patents. The Report finds that patent clearance is generally effective (which is not to say ideal) in industries such as chemicals, pharmaceuticals, and biotechnology, but in other industries such as IT and telecommunications, it is essentially impossible to conduct effective patent clearance [77-78].

The discussion of the importance of patent notice is followed by a very useful description of the role of "patent assertion entities." This is the Report’s preferred term for what are more commonly known as “non-practising entities” or, pejoratively, patent trolls. The Report points out that many entities which do not practice their invention themselves, nonetheless exploit their patent rights in a very traditional manner, as when a start-up that has done the basic break-through research seeks to licence to a larger firm to take the product to commercialization. Patent assertion entities, in contrast, acquire patents to generate revenue through licencing. The Report notes that this may allow small patentee with insufficient resources to sustain an infringement action a way of enforcing their patent rights, but when the patents are asserted opportunistically ex post against an infringer which developed the technology independently, the effect on competition and innovation is likely to be negative.

Most of this discussion is found in Chapter 2 of the Report (pp.50 - 72), which is well worth reading. (About half of the space is taken up with footnotes, so it is not as long as it looks.) Chapter 3 of the Report focuses on specific recommendations as to how to improve patent notice, while chapters 4-8 look at patent remedies. In upcoming posts I will blog on specific points that are of interest from a Canadian perspective.

An Application Deemed Abandoned by Application of Law Cannot be Reinstated

M-Systems Flash Disk Pionerers Ltd v. Commissioner of Patents 2011 FCA 112 affm’g 2010 FC441


This brief decision of the FCA affirms its prior holding in DBC Marine Safety Systems Ltd. v. Canada (Commissioner of Patents), 2008 FCA 256 affm'g 2007 FC 1142, that the Commissioner has no discretion to reinstate an application that has been deemed abandoned by application of law. The only twist is that the applicant in M-Systems had argued that Rule 29, permitting the examiner to require identification of additional prior art raised in a foreign application, is inconsistent with the Act and “unconstitutional” under the s 2(e) of the Canadian Bill of Rights. Both of these last ditch arguments were rejected by de Montigny J at first instance and this was affirmed by the FCA.

International Ex Turpi Causa as a Defence to an Undertaking in Damages

Les Laboratoires Servier & Anor v Apotex Inc & Ors [2011] EWHC 730 (Pat) Arnold J

In the latest decision in the perindopril litigation, Arnold J applied the maxim ex turpi causa non oritur actio in exercising his discretion to decline enforcement of an undertaking in damages given by a patentee who had obtained an interlocutory injunction.1 The issue arose because the product in question was patented in the jurisdiction of manufacture (Canada), but not in the jurisdiction of sale (the UK). It is thus one aspect of the larger problem of territorial limits to patent protection, and ultimately Arnold J’s decision turned on principles of international comity.

Servier obtained a compound patent for perindopril in both Canada and Europe. The European compound patent expired in 2001. The corresponding Canadian patent, which was governed by the old Act, was delayed in conflict proceedings. It was not granted until 2001, and will not expire until 2018. Servier was granted a further European patent for a crystalline form of perindopril in 2004. In 2006 Servier commenced an infringement action against Apotex based on the European crystalline form patent. Servier obtained an interlocutory injunction from Mann J [2006] EWHC 2137 (Pat), subject to the usual undertaking in damages. Servier’s European patent action ultimately failed as the crystalline form patent was declared invalid: [2008] EWCACiv 445 aff’g [2007] EWHC 1538 (Pat).

Apotex sought damages on the undertaking for the loss of UK sales. This was heard in June of 2008 and Norris J held that Servier was liable for £17.5 million: [2008] EWHC 2347 (Ch). Apotex’s loss was calculated on the basis that the perindopril would be manufactured at its facility in Canada and exported to the UK. However, at the same time Servier and Apotex were litigating the compound patent in Canada. On July 2, 2008 Snider J held that the Canadian patent was valid and on June 30, 2009 the FCA affirmed: Laboratoires Servier v. Apotex Inc./ perindopril, 2009 FCA 222 affm'g 2008 FC 825. Thus it became clear that manufacture in Canada of the product which Apotex would have sold in the UK but for the injunction, would have infringed the Canadian patent. Consequently Servier sought and ultimately obtained permission to amend its pleading to raise the defence that Apotex could not claim damages on the undertaking for lost sales when the manufacture of the product would have been illegal: [2010] EWCA 279 (Civ).

Obtaining an NOC is Not Grounds for an Infringement Action

Eli Lilly Canada Inc v Nu-Pharm Inc / olanzapine 2011 FC 255 Snider J

When a generic pharmaceutical company obtains an NOC for a drug, it seems natural to assume that it intend to begin selling that drug, and patentee pharma companies are often anxious to begin infringement proceedings as soon as possible. The courts have been consistently unwilling to allow an action to proceed solely on the basis that the generic has obtained an NOC: AstraZeneca Canada Inc. v Novopharm Ltd. / rosuvastatin, 2009 FC 1209 Hughes J. affm’d 2010 FCA112 Noël JA: Pelletier, Dawson JJA, is the leading case, both for Hughes J’s review of the case law, and because his decision striking the Statement of Claim was affirmed by the FCA. The basic problem for the patentee is that the Federal Court has been unwilling to infer that the generic will enter the market prior to the expiry of the relevant patent, simply from the fact that it has obtained an NOC (see 2009 FC 1209 [14]). A quia timet claim for future infringement will fail for this reason [ibid 23]. A bare assertion that the defendant has manufactured the compound etc. will be disregarded as too speculative to support a claim of current infringement if made without any evidentiary foundation [ibid 18].

Snider J's decision in the olanzapine case confirms and extends this line of cases. In the rosuvastatin case, the generic had not obtained an NOC at all, which added an layer of speculation, particularly as the patentee was seeking an order of prohibition at the same time that it sought to launch an infringement action. In the olanzapine case, Nu-Pharm had obtained an NOC, days after the patent had been declared invalid in infringement proceedings (Eli Lilly Canada Inc. v. Novopharm Ltd. / olanzapine 2009 FC 1018) and before the trial decision invalidating the patent was reversed and remanded (2010 FCA 197). However, Snider J nonetheless held that the Statement of Claim should be struck, as there was no allegation of activity outside of the regulatory safe-harbor of section 55.2(1). Snider J made this holding on the assumption that the preparation of the ANDS and the obtaining of the NOC are in themselves acts of infringement [25], a point which is not yet settled.

Beyond these details, the case affirmed the general point that a patentee cannot launch an infringement action merely because the generic has obtained an NOC: “the pleadings disclose nothing beyond an assertion that Nu-Pharm is positioning itself, through an unnamed third party, to enter the market for olanzapine and, that by doing so, Nu-Pharm will infringe the patent. . . .[T]he Statement of Claim is, at least in part, very much a quia timet proceeding to which the findings of Justice Hughes and the Court of Appeal in AstraZeneca FCA are applicable” [31].

Direct evidence of commercial stockpiling would presumably suffice. But what about the patentee’s basic point that one can reasonably infer an intent to infringe from the fact that the generic has obtained an NOC? (While the question of whether obtaining an NOC is itself an act of infringement is in principle open, I cannot see how getting permission to make or sell is the same as making or selling.) It would be interesting to have statistical evidence on this point. If it turned out that a generic that obtained an NOC only launched during the term of the relevant patent 30% the time, then the view that obtaining an NOC cannot support a quia timet action would seem sound. But if that figure is 95%, the common sense inference would be stronger. Of course, it is not clear whether a court would find statistical evidence relevant to the intent of a particular defendant, and in any event I am not aware of any such study. I’d certainly be curious to find out what those stats are.