Gilead Science Inc v Teva Canada Ltd / tenofovir (NOC) 2013 FC 1270 Barnes J
Tenofovir is a drug used in the treatment of HIV/AIDS. The ‘619 patent claims tenofovir
disoproxil, a prodrug of tenofovir, while the ‘059 patent claims the fumarate salt of tenofovir
disoproxil [3]. The main issue in respect of both patents was invalidity for obviousness, and in
particular whether the invention was “obvious to try.” Barnes J held the ‘619 patent to be valid,
and the ‘059 patent to be invalid. In my view, his application of the obvious to try analysis was
correct, but the case reveals a tension in the obvious to try test which has emerged particularly
since the FCA decision in Sanofi-Aventis v Apotex Inc / clopidogrel 2013 FCA 186 (blogged
here).
In Sanofi 2008 SCC 61 the SCC held that an “obvious to try” test may be warranted as part of the
obviousness analysis, and one factor to be considered is “Is it more or less self-evident that what
is being tried ought to work?” [69]. This phrase contains an important ambiguity. Does “what is
being tried” refer to the particular claimed invention? That is, to establish obviousness it is
necessary that a posita could have predicted in advance of experimentation that the claimed
invention would solve the problem at hand? Or does “what is being tried” refer simply to a
solution to the problem? That is, it is more or less self-evident that a posita would be able to
solve the problem at hand, even though it may not have been obvious prior to experimentation
that the particular claimed invention would be the solution? For example, if the problem is to
resolve a racemate into enantiomers, must it be predictable in advance that the claimed method
would work, or it is sufficient if the claimed invention is one of three standard methods, and it is
plain that one of them would work, even if not predictable which method in particular would be
successful? The first, narrower, approach is more favourable to the patentee, while the broader
approach is more likely to result in the invention being found obvious. (I should repeat that this
question, whichever is correct, does not exhaust the obvious to try analysis; it is only one factor
to be considered.)
Tuesday, December 31, 2013
Thursday, December 26, 2013
Discovery of a New Mechanism of Action is Not an Invention
Alcon Canada Inc v Apotex Inc / olopatadine (NOC) 2012 FC 410 Barnes J
2,195,094 / olopatadine / PATANOL / T-564-10
“Merely knowing something new about something old is not enough” to support a patent: Genentech Inc.'s Patent [1989] RPC 147, 208 (CA); see also Chamberlain & Hookham v Mayor of Bradford (1903), 20 RPC 673, 687 (HL). In particular, discovering the mechanism of action of a known drug will not support a patent if the use itself is not new: Lundbeck v Ratiopharm 2009 FC 1102 at [ 20], [149], [189-92]; Astrazeneca v Apotex / omeprazole (NOC), 2007 FC 688, [103]. The reason is that the claims define the scope of the invention, so it is the invention as claimed which must be novel. Discovery of a new mechanism of action does not lend novelty to an invention if a patent would prevent the public from doing that which was already known.
Alcon / olopatadine presents a slight variation on this theme. The inventors had discovered that a known compound had a previously unknown mechanism of action. However, no new therapuetic uses were explicitly disclosed, and the claims, on their face, claimed known uses. In this NOC proceeding, Alcon tried to remedy the problem by arguing that the claims should be construed to be limited to treatment of diseases which were dependent on the mechanism of action in question. This strategy failed. Barnes J recognized “purposive construction is capable of expanding or limiting a literal text” [28] but on the facts the interpretation proposed by Alcon could not be supported. A straightforward reading of the claims was clear, as Alcon acknowledged [33], and Barnes J might have decided the case on the principle that the text plays a dominant role, even in purposive interpretation: Canada Trustco 2005 SCC 54, [2005] 2 SCR 601 [10]. However, Barnes J did not decide on so narrow a ground. He recognized that “[e]ven a term that appears to be plain and unambiguous may, when read in the context, reasonably support a different meaning” [27] and he relied primarily on a purposive interpretation of the disclosure. Ultimately, the specification itself did not define a novel use, so the difficult question of whether the claims, properly construed, should be limited by the use disclosed but not explicitly claimed, did not really arise.
Olopatadine was a known compound which was known to be an antihistamine useful in treating allergic eye diseases in humans [20]. Allergic eye diseases arise when allergens bind to mast cells which then degranulate, releasing a variety of chemical mediators including histamines. The mediators cause the allergy symptoms [9]. An antihistamine suppresses the allergic response by blocking histamine receptors. A drawback of antihistamines is that they only block one type of mediator. There was therefore a recognized need for mast cell stabilizers, that would work by preventing degranulation. It was thought that compounds that were effective antihistamines were unlikely to be useful as mast cell stabilizers because they were observed in vitro to rupture mast cells – that is, antihistamines were generally thought to be mast cell destabilizers [14]. Alcon’s technical contribution was the discovery that olopatadine, even though it was known to be an antihistamine, was also a mast cell stabilizer at therapeutic doses [16].
The claims at issue in Alcon / olopatadine, Claim 8 and 20 of the ‘094 patent [20], were to the use of, and a composition of, 0.1% w/v of olopatadine “for treating allergic eye diseases.” The difficulty, as Alcon acknowledged, is that on a plain reading the claims were too broad [33]: “allergic eye diseases” encompasses any eye disease, whether mediated by antihistamines or other mediators, and “treating” encompasses relieving the symptoms by either blocking histamines, or by preventing mast cell degranulation. If so interpreted, the claims would be invalid as encompassing the known use of olopatadine as an antihistamine. Alcon argued that these words should be interpreted in light of the disclosure as meaning that the claimed composition must be a mast cell stabilizer for treatment of “an allergic eye disease wherein mast cell degranulation contributes to the development of the disease state” [23] (and see [33]).
The difficulty is that while the specification of the ‘094 patent discussed at length the novel discovery that olopatadine was a mast cell inhibitor, and it also stated clearly that it could therefore be used for treating allergic eye diseases, even the disclosure did not specify any new use: “While these activity profile features are described in the disclosure and quantified with respect to olopatadine’s mast cell stabilizing property, those references are similarly not tied to any new form of clinical use” [38]. If a new use had been clearly specified in the disclosure, but omitted from the claims, there would still be a difficult question of whether that use should be read as a limitation, on a purposive construction of the claims. But absent any clear limitation on the use somewhere, whether in the disclosure or the claims, there was no new invention disclosed at all, but only a new mechanism of action. As Barnes J put it:
This seems to me to be a fair reading of the specification. The disclosure does state that “[t]he present invention relates to topical ophthalmic formulations used for treating allergic eye such as allergic conjunctivitis, vernal conjunctivitis, vernal keratoconjunctivitis, and giant papillary conjunctivitis” (p1), and at the claim construction date it was apparently believed that all these were thought to have mast cell degranulation as all or part of the disease state, but the “such as” language is not limiting. In other circumstances one can imagine that Alcon might have objected strenuously to using a “such as” list to implicitly define a limitation on the uses to which the invention might be put.
The expert evidence foundered for the same reason (my emphasis):
2,195,094 / olopatadine / PATANOL / T-564-10
“Merely knowing something new about something old is not enough” to support a patent: Genentech Inc.'s Patent [1989] RPC 147, 208 (CA); see also Chamberlain & Hookham v Mayor of Bradford (1903), 20 RPC 673, 687 (HL). In particular, discovering the mechanism of action of a known drug will not support a patent if the use itself is not new: Lundbeck v Ratiopharm 2009 FC 1102 at [ 20], [149], [189-92]; Astrazeneca v Apotex / omeprazole (NOC), 2007 FC 688, [103]. The reason is that the claims define the scope of the invention, so it is the invention as claimed which must be novel. Discovery of a new mechanism of action does not lend novelty to an invention if a patent would prevent the public from doing that which was already known.
Alcon / olopatadine presents a slight variation on this theme. The inventors had discovered that a known compound had a previously unknown mechanism of action. However, no new therapuetic uses were explicitly disclosed, and the claims, on their face, claimed known uses. In this NOC proceeding, Alcon tried to remedy the problem by arguing that the claims should be construed to be limited to treatment of diseases which were dependent on the mechanism of action in question. This strategy failed. Barnes J recognized “purposive construction is capable of expanding or limiting a literal text” [28] but on the facts the interpretation proposed by Alcon could not be supported. A straightforward reading of the claims was clear, as Alcon acknowledged [33], and Barnes J might have decided the case on the principle that the text plays a dominant role, even in purposive interpretation: Canada Trustco 2005 SCC 54, [2005] 2 SCR 601 [10]. However, Barnes J did not decide on so narrow a ground. He recognized that “[e]ven a term that appears to be plain and unambiguous may, when read in the context, reasonably support a different meaning” [27] and he relied primarily on a purposive interpretation of the disclosure. Ultimately, the specification itself did not define a novel use, so the difficult question of whether the claims, properly construed, should be limited by the use disclosed but not explicitly claimed, did not really arise.
Olopatadine was a known compound which was known to be an antihistamine useful in treating allergic eye diseases in humans [20]. Allergic eye diseases arise when allergens bind to mast cells which then degranulate, releasing a variety of chemical mediators including histamines. The mediators cause the allergy symptoms [9]. An antihistamine suppresses the allergic response by blocking histamine receptors. A drawback of antihistamines is that they only block one type of mediator. There was therefore a recognized need for mast cell stabilizers, that would work by preventing degranulation. It was thought that compounds that were effective antihistamines were unlikely to be useful as mast cell stabilizers because they were observed in vitro to rupture mast cells – that is, antihistamines were generally thought to be mast cell destabilizers [14]. Alcon’s technical contribution was the discovery that olopatadine, even though it was known to be an antihistamine, was also a mast cell stabilizer at therapeutic doses [16].
The claims at issue in Alcon / olopatadine, Claim 8 and 20 of the ‘094 patent [20], were to the use of, and a composition of, 0.1% w/v of olopatadine “for treating allergic eye diseases.” The difficulty, as Alcon acknowledged, is that on a plain reading the claims were too broad [33]: “allergic eye diseases” encompasses any eye disease, whether mediated by antihistamines or other mediators, and “treating” encompasses relieving the symptoms by either blocking histamines, or by preventing mast cell degranulation. If so interpreted, the claims would be invalid as encompassing the known use of olopatadine as an antihistamine. Alcon argued that these words should be interpreted in light of the disclosure as meaning that the claimed composition must be a mast cell stabilizer for treatment of “an allergic eye disease wherein mast cell degranulation contributes to the development of the disease state” [23] (and see [33]).
The difficulty is that while the specification of the ‘094 patent discussed at length the novel discovery that olopatadine was a mast cell inhibitor, and it also stated clearly that it could therefore be used for treating allergic eye diseases, even the disclosure did not specify any new use: “While these activity profile features are described in the disclosure and quantified with respect to olopatadine’s mast cell stabilizing property, those references are similarly not tied to any new form of clinical use” [38]. If a new use had been clearly specified in the disclosure, but omitted from the claims, there would still be a difficult question of whether that use should be read as a limitation, on a purposive construction of the claims. But absent any clear limitation on the use somewhere, whether in the disclosure or the claims, there was no new invention disclosed at all, but only a new mechanism of action. As Barnes J put it:
[39] The disclosure passages Alcon relies upon also fail to clearly identify the nature or
the scope of the invention. There is nothing in these passages which distinctly and
explicitly identifies the subject matter of the invention whether as a new use or otherwise.
While there are references to prophylactic use, dosing frequencies and demonstrated
stabilization activity at specific concentrations, none of those features are clearly
identified as an element of the inventive concept and none of that language is used in a
way that would serve to clearly define the words in dispute in Claims 1 and 13.
This seems to me to be a fair reading of the specification. The disclosure does state that “[t]he present invention relates to topical ophthalmic formulations used for treating allergic eye such as allergic conjunctivitis, vernal conjunctivitis, vernal keratoconjunctivitis, and giant papillary conjunctivitis” (p1), and at the claim construction date it was apparently believed that all these were thought to have mast cell degranulation as all or part of the disease state, but the “such as” language is not limiting. In other circumstances one can imagine that Alcon might have objected strenuously to using a “such as” list to implicitly define a limitation on the uses to which the invention might be put.
The expert evidence foundered for the same reason (my emphasis):
[45] Except for a reference to a possible use as a prophylaxis, Dr. Church and the other
Alcon witnesses identify no new clinical use for olopatadine that arises out of the
discovery of its mast cell stabilizing properties beyond the sophism that if olopatadine
was never used before as a mast cell stabilizer it therefore must be a new use. It seems to
me that this approach seriously strains the meaning of the word “treating” and the concept
of a new use discovery. The information discovered by Alcon may be useful but it does
not, by that fact alone, constitute a new use for olopatadine. A clinician treats a patient for
an allergic reaction in the eye by suppressing the troubling or damaging signs and
symptoms of the disorder. In the absence of a new clinical use for an old drug, new
knowledge about how it works is not patentable. Similarly, the discovery that olopatadine
was more effective in the treatment of allergic eye diseases than initially understood (see
Affidavit of Martin K. Church, Ph.D., D. Sc. (24 January 2011) at paras 42-43, 46-48 [
Affidavit of Dr. Church]) is unpatenable because the improved efficacy of the drug was
inherent in its known utility as an antihistamine.
Monday, December 23, 2013
Onus, Modeling and Pre-Judgment Interest
Apotex Inc v Takeda Canada Inc / pantoprazole (NOC s 8) 2013 FC 1237 Phelan J
PANTOLOC / pantoprazole / 2,092,694 and 2,089,748
This post briefly discusses some miscellaneous issues arising from Pantoprazole.
Onus
On this issue of Phelan J adopted [23] the summary provided by Hughes J in Apotex Inc v AstraZeneca Canada Inc / omeprazole (NOC) 2012 FC 559
Modeling
Different experts took different approaches to determining Apotex’s share of the generic market. Harrington’s evidence (for Apotex) was based on data to which business judgment was applied to determine market shares, while Grottendorst (for Takeda) and Tepperman (for Apotex) used econometric models in their calculations. Phelan J did not prefer one approach to the other: “opinion evidence always contains subjective elements, educated choices even in a purely mathematical model. . . . There is no magic nor necessarily any compelling reason to use an econometric model” [82]. In the end, Phelan J accepted Harrington’s report as the basis for calculating Apotex’s market share, but he rejected Grottendorst because of specific defects in the model, and not because it used econometric modeling. It is clear that he would have been fully prepared to accept a report based on econometric modeling, if the specific model was sound [84].
Pre-Judgment Interest
The interest rate and the date that interest begins to run were both at issue.
Phelan J held that interest begins to run from Apotex’s patent hold date, March 2007, not the date on which Takeda’s prohibition application was dismissed. The applicable statute, the Ontario Courts of Justice Act, s 128(1) provides that interest runs from “the date the cause of action arose,” and Phelan J held that “the cause of action arose when the period of liability commenced” [174]. This makes sense from a compensation perspective, because that is when Apotex would have had the use of the money represented by the damages.
However, the interest rate is based on the rate in effect on the date of Apotex’s statement of claim, November 2008. Again this is based on the statute, s 127, which defines the prejudgment interest rate as “the bank rate at the end of the first day of the last month of the quarter preceding the quarter in which the proceeding was commenced” [171, Phelan J's emphasis]. While this result seems right as a matter of the statute, it is not particularly satisfactory from a compensation perspective; but the statutory interest rate provisions are not generally very satisfactory from a compensation perspective: see generally Bank of America Canada v Mutual Trust Co 2002 SCC 43
PANTOLOC / pantoprazole / 2,092,694 and 2,089,748
This post briefly discusses some miscellaneous issues arising from Pantoprazole.
Onus
On this issue of Phelan J adopted [23] the summary provided by Hughes J in Apotex Inc v AstraZeneca Canada Inc / omeprazole (NOC) 2012 FC 559
[35] In brief, it may be said that the party who has led sufficient evidence to put an
issue "in play", must, to succeed on that issue, put in sufficient evidence so that on the
balance of probabilities, the relevant facts are accepted by the Court as having been
proved. Thus Apotex must put in play and subsequently prove on the balance of
probabilities the facts that it needs to establish its case for compensation. AstraZeneca
must put in play and subsequently prove those facts that it asserts disqualifies Apotex or
reduces or negates Apotex's claim for compensation.
Modeling
Different experts took different approaches to determining Apotex’s share of the generic market. Harrington’s evidence (for Apotex) was based on data to which business judgment was applied to determine market shares, while Grottendorst (for Takeda) and Tepperman (for Apotex) used econometric models in their calculations. Phelan J did not prefer one approach to the other: “opinion evidence always contains subjective elements, educated choices even in a purely mathematical model. . . . There is no magic nor necessarily any compelling reason to use an econometric model” [82]. In the end, Phelan J accepted Harrington’s report as the basis for calculating Apotex’s market share, but he rejected Grottendorst because of specific defects in the model, and not because it used econometric modeling. It is clear that he would have been fully prepared to accept a report based on econometric modeling, if the specific model was sound [84].
Pre-Judgment Interest
The interest rate and the date that interest begins to run were both at issue.
Phelan J held that interest begins to run from Apotex’s patent hold date, March 2007, not the date on which Takeda’s prohibition application was dismissed. The applicable statute, the Ontario Courts of Justice Act, s 128(1) provides that interest runs from “the date the cause of action arose,” and Phelan J held that “the cause of action arose when the period of liability commenced” [174]. This makes sense from a compensation perspective, because that is when Apotex would have had the use of the money represented by the damages.
However, the interest rate is based on the rate in effect on the date of Apotex’s statement of claim, November 2008. Again this is based on the statute, s 127, which defines the prejudgment interest rate as “the bank rate at the end of the first day of the last month of the quarter preceding the quarter in which the proceeding was commenced” [171, Phelan J's emphasis]. While this result seems right as a matter of the statute, it is not particularly satisfactory from a compensation perspective; but the statutory interest rate provisions are not generally very satisfactory from a compensation perspective: see generally Bank of America Canada v Mutual Trust Co 2002 SCC 43
Friday, December 20, 2013
When is an Allegation an Undertaking?
Apotex Inc v Takeda Canada Inc / pantoprazole (NOC s 8) 2013 FC 1237 Phelan J
PANTOLOC / pantoprazole / 2,092,694 and 2,089,748
Takeda’s ‘748 patent claims the use of pantoprazole in combination with a
helicobacter-inhibiting anti-microbial (so-called triple therapy). Apotex’s NOA stated that
Apotex’s product would not be marketed for triple therapy [178]:
Takeda argued that (1) this and other similar assertions in the NOA amounted to an undertaking; (2) Gauthier J relied on this undertaking in concluding that Takeda had not succeeded in establishing infringement; (3) Apotex in fact acted in breach of the undertaking, and (4) the Court should therefore exercise its discretion under s 8(5) to deny Apotex any damages [176].
Phelan J held against Takeda on the first point:
Phelan J discussed two cases in which an allegation did amount to an undertaking, and then continued:
While Phelan J did not say so explicitly, his decision suggests that the gravity of an allegation of a breach of an undertaking [177] is the reason why such specificity is required.
Phelan J did not make a clear determination on the remaining issues, in party because he considered the terms of the putative undertaking to be unclear [202], but his discussion suggests that Takeda had at least a good arguable case on the other point. His holding that there was no undertaking was determinative [202].
PANTOLOC / pantoprazole / 2,092,694 and 2,089,748
Each of the
claims of the ’748 Patent includes as an essential element a
Helicobacter-inhibiting anti-microbial agent. Our sodium pantoprazole
tablets shall not contain said
agent, as that term is construed in accordance with the claims of the
’748 Patent, nor shall
our tablets be marketed or promoted to doctors, pharmacists or others to
be used in
combination with a Helicobacter-inhibiting anti-microbial agent or as
part of a
medicament package comprising said agent. As such, our tablets shall not
infringe any of
the claims of the ’748 patent.
Takeda argued that (1) this and other similar assertions in the NOA amounted to an undertaking; (2) Gauthier J relied on this undertaking in concluding that Takeda had not succeeded in establishing infringement; (3) Apotex in fact acted in breach of the undertaking, and (4) the Court should therefore exercise its discretion under s 8(5) to deny Apotex any damages [176].
Phelan J held against Takeda on the first point:
[182] While statements in an NOA may rise to the level of an undertaking to be relied on
by a court, such statements must be clear and unequivocal undertakings specifically or by
inference.
Phelan J discussed two cases in which an allegation did amount to an undertaking, and then continued:
[186] The case law does not support the proposition that a bare pleading in an NOA
constitutes an enforceable undertaking. In my view, there must be more than just the
allegation unless it is phrased as an undertaking.
[187] If an undertaking was so clearly in Justice Gauthier’s mind or if an undertaking was
critical to her decision, she would have so stated it. I cannot believe that such a
knowledgeable and experienced judge would not have stated an undertaking as the basis
for the decision if that had been intended.
While Phelan J did not say so explicitly, his decision suggests that the gravity of an allegation of a breach of an undertaking [177] is the reason why such specificity is required.
Phelan J did not make a clear determination on the remaining issues, in party because he considered the terms of the putative undertaking to be unclear [202], but his discussion suggests that Takeda had at least a good arguable case on the other point. His holding that there was no undertaking was determinative [202].
Thursday, December 19, 2013
Double Ramp-up Revisited
Apotex Inc v Takeda Canada Inc / pantoprazole (NOC s 8) 2013 FC 1237 Phelan J
PANTOLOC / pantoprazole / 2,092,694 and 2,089,748
The problem of double ramp-up was explained by Phelan J as follows:
In Apo-ramipril 2012 FC 553 [265-270] Snider J refused to allow Apotex to deduct the ramp-up loss that occurred in the real world, holding that this was precluded by the FCA Alendronate 2009 FCA 187, which held that losses incurred after the statutory period are not compensable as a matter of law. In his subsequent Alendronate 2012 FC 1235 decision assessing s 8 damages, Hughes J disagreed with Snider J, saying “I am not satisfied, particularly given the common view of the accounting experts that, normally, compensation would be made to prevent a double ramp-up loss, that the Court of Appeal had this situation in mind” [86]. He nonetheless followed Snider J, citing “the interests of comity and in the expectation of an inevitable appeal.” In my post on Hughes J’s decision, I remarked that “I am not sure that the principle of comity required him to follow Snider J” and “a novel point of law should not be considered settled by a single decision.”
In Pantoprazole, Phelan J declined to follow Hughes J and Snider J on this point, saying, rightly in my view, that
Phelan J then undertook a purposive analysis of s 8, noting that the NOC Regulations “are not tools to penalize generic drug manufacturers where they have been successful against a brand company,” and “[t]he intent under the Regulations as under injunction law is to return the enjoined party to the position it would be in if the injunction/stay had not been granted (assuming the enjoined party is ultimately successful)” [134], [135]. He pointed out that in Alendronate the FCA had been dealing with springboard damages, not double ramp-up [136], and springboard damages are more clearly suffered outside the compensible period [137]. He therefore held that Apotex’s losses during the ramp-up period should not be included in the but for world, where such losses were experienced in the actual world [148].
I can see both sides of this argument. Phelan J’s purposive analysis is compelling, but the thrust of the FCA’s Alendronate was that the NOC Regulations aim at statutorily defined compensation, rather than full compensation in fact, so the question is as to exactly how far the FCA intended this principle to extend. But however this point is eventually resolved, I do feel that it is best to fully explore a contentious legal issue such as this at the FC level, rather than having all subsequent decisions simply follow whichever opinion happens to be first. As Phelan J pointed out, there is no particular legal basis for presuming there will be an appeal [131], and if there is an appeal and the FCA were to reverse, it seems wrong that the intervening parties should be burdened with launching an appeal to reverse the trial decision on a point on which the trial judge him or herself felt was wrongly decided.
PANTOLOC / pantoprazole / 2,092,694 and 2,089,748
The problem of double ramp-up was explained by Phelan J as follows:
[122] Ramp up is the initial period during which the generic drug has to be made or
acquired, orders received from customers and the drugs shipped to those customers. It
covers the period before Apo-pantoprazole achieves steady state sales.
[123] In the real world, Apotex experienced ramp up after it was successful in resisting
Takeda’s attempt to obtain a prohibition order which lasted until it reached steady state.
[124] In the hypothetical world, the calculation of Apotex’s loss reflected this ramp up
incurred or experienced in the Relevant Period.
[125] The effect of the calculation is that Apotex experiences the effect of ramp up in the
hypothetical world resulting in a deduction from what would be steady state revenue and
then in the real world it experiences the same ramp up consequences. This is double
counting for the same circumstance; a disadvantage to Apotex and an advantage to
Takeda.
In Apo-ramipril 2012 FC 553 [265-270] Snider J refused to allow Apotex to deduct the ramp-up loss that occurred in the real world, holding that this was precluded by the FCA Alendronate 2009 FCA 187, which held that losses incurred after the statutory period are not compensable as a matter of law. In his subsequent Alendronate 2012 FC 1235 decision assessing s 8 damages, Hughes J disagreed with Snider J, saying “I am not satisfied, particularly given the common view of the accounting experts that, normally, compensation would be made to prevent a double ramp-up loss, that the Court of Appeal had this situation in mind” [86]. He nonetheless followed Snider J, citing “the interests of comity and in the expectation of an inevitable appeal.” In my post on Hughes J’s decision, I remarked that “I am not sure that the principle of comity required him to follow Snider J” and “a novel point of law should not be considered settled by a single decision.”
In Pantoprazole, Phelan J declined to follow Hughes J and Snider J on this point, saying, rightly in my view, that
[131] With the greatest respect, I do not view the determination of “double ramp up” in
the present case as resolvable under judicial comity nor a matter on which one can
presume to be eventually resolved on appeal.
Phelan J then undertook a purposive analysis of s 8, noting that the NOC Regulations “are not tools to penalize generic drug manufacturers where they have been successful against a brand company,” and “[t]he intent under the Regulations as under injunction law is to return the enjoined party to the position it would be in if the injunction/stay had not been granted (assuming the enjoined party is ultimately successful)” [134], [135]. He pointed out that in Alendronate the FCA had been dealing with springboard damages, not double ramp-up [136], and springboard damages are more clearly suffered outside the compensible period [137]. He therefore held that Apotex’s losses during the ramp-up period should not be included in the but for world, where such losses were experienced in the actual world [148].
I can see both sides of this argument. Phelan J’s purposive analysis is compelling, but the thrust of the FCA’s Alendronate was that the NOC Regulations aim at statutorily defined compensation, rather than full compensation in fact, so the question is as to exactly how far the FCA intended this principle to extend. But however this point is eventually resolved, I do feel that it is best to fully explore a contentious legal issue such as this at the FC level, rather than having all subsequent decisions simply follow whichever opinion happens to be first. As Phelan J pointed out, there is no particular legal basis for presuming there will be an appeal [131], and if there is an appeal and the FCA were to reverse, it seems wrong that the intervening parties should be burdened with launching an appeal to reverse the trial decision on a point on which the trial judge him or herself felt was wrongly decided.
Wednesday, December 18, 2013
How Do the NOC Regulations Apply in the But For World of S 8 Damages?
Apotex Inc v Takeda Canada Inc / pantoprazole (NOC s 8) 2013 FC 1237 Phelan J
PANTOLOC / pantoprazole / 2,092,694 and 2,089,748
Phelan J’s Pantoprazole decision is the fourth decision on damages under s 8 of the NOC Regulations to go (almost) all the way to quantum, after the companion cases decided by Snider J, Teva-ramipril 2012 FC 552 and Apo-ramipril 2012 FC 553 (blogged here, here and here), and Hughes J’s Alendronate decision, 2012 FC 1235 (blogged here), supplementary reasons 2012 FC 1418 (blogged here). The legal questions relating to s 8 damages are well on their way to becoming established, but it is now apparent that the assessment of s 8 will require a complex and difficult factual inquiry. (The parties did not ask Phelan J to determine the quantum of damages, but only to settle some disputed issues which, it is hoped would allow the parties to arrive at a figure without the need to return to court.)
The general approach to s 8 damages set out in the cases, including Pantoprazole, is consistent with the “but for” approach to damages generally: damages are assessed as the difference between Apotex’s actual profits and the profits it would have made in the “but for” world in which it would not have been subject to the order of prohibition [14]. As discussed here, construction of the hypothetical world is almost entirely as a matter of determining what would in fact have happened but for the order of prohibition.
One established exception to this purely factual inquiry is that the FCA has held that the generic is not entitled to so-called springboard damages, on the basis that as a matter of statutory interpretation, losses incurred after the statutory period are not compensable as a matter of law even if they were in fact caused by the statutory stay: Merck Frosst Canada Ltd v Apotex Inc / alendronate (NOC) 2009 FCA 187.
A second legal question concerns the construction of the but for world. How do the NOC Regulations themselves apply in the but for world [33]? Should we assume that in the but for world the NOC Regulations do not exist at all? Should we assume that they do not exist for the s 8 claimant, but they exist for everyone else? Should we assume that they are fully operative even for the s 8 claimant, except that the statutory stay is not triggered? (That would imply that the s 8 claimant would still be required to file an NOA in the but for world.) Should we assume that the NOC Regulations do not exist for the section 8 claimant, and all other generics are prohibited from entering? All of these answers are equally consistent with the principle of “but for” compensation, because the question is how to construct the but for world itself. The Regulations do not answer this question directly. They tell us that the stay would not have been triggered in the but for world, but apart from that they do not tell us what parts of the Regulations would be effective. Section 8 states that the generic is entitled to recover “any loss suffered” during the period beginning on the date on which an NOC would have been issued “in the absence of these Regulations,” and in Teva-ramipril Teva argued that this means that in the but for world, the NOC Regulations would not exist at all. Snider J rejected this, noting that “the phrase ‘in the absence of these Regulations’ only modifies the certification date” [50]. That is, “in the absence of these Regulations” tells us when the start period is, not what the but for world is like.
Phelan J followed Snider J in holding that in the but for world, the generic does not have to file its NOA [35], [37], [Apo-ramipril [194]]. This is important to the damages calculation, because it means that the patentee will not be alerted to the possibility of generic entry by the NOA, and so will not have time to prepare to launch an AG, unless, on the facts, it would have known of the generic launch for some other reason [39].
However, while “in the hypothetical world, [the s 8 claimant] acts without the obligations and limitations of the Regulations” [40], all of the other generics are subject to the Regulations [56]: “Takeda does not enjoy the benefit of claiming that because Apotex was successful, all other generics are, for purposes of hypothetical world analysis, free to enter the market.” This is important to the damages calculation, because entry by other generics will cut the claimant’s profits. (Multiple generic entry may be bad for the patentee in the real world, but it is good for the patentee in the but for world.)
The question of how the NOC Regulations apply in the but for world is surely a question of law, and, as Phelan J noted, Apo-ramipril is under appeal, so the answer may change, but for now the answer is that the NOC Regulations are assumed not to apply to the claimant, but they do apply to all other market entrants. This seems to me to be as sensible an answer as any. As Snider J pointed out in Apo-ramipril [194], regulatory activity is generally kept confidential, so if the generic is assumed not to be subject to the stay, there is no reason for it to serve an NOA. On the other hand, the NOC Regulations cannot be assumed to be non-existent. Suppose generic A wins in its NOC proceedings, but generic B loses in its NOC proceedings relating to the same product, and so was subject to an order of prohibition. It seems wrong to suppose that generic B would have been able to enter the market for the purposes of generic A’s s 8 damages, when had tried and failed to obtain an NOC in respect of that very product. This was essentially what had happened in relation to Apotex’s entry as a second generic in Teva-ramipril, and this is why Snider J held that the other generics remained subject to the NOC Regulations [148]. The assumption that all generics except the s 8 claimant are prohibited from entry has the virtue of simplicity – the but for world will be easy to construct – but it would imply that multiple generics could get compensation from the same patentee in respect of the same drug, all on the basis that they would have been the sole generic.
It is the possibility of multiple generic entry that makes assessment of s 8 damage factually complex, as it is necessary to explore and dispute a number of possible but for worlds, in which various parties might have entered at various times. This is in contrast to a patent infringement action in which the patentee prevails; in that case, there is a single possible but for world, namely one in which everyone but the patentee is in the market. The NOC world is like a tort claim in which the defendant wrongly hit the plaintiff with a crippling blow, but we know that even in the absence of that wrong, several other, weaker, opponents would have legitimately entered the fray. We can’t make the easy assumption that but for the tort, the plaintiff would have been healthy; the question is how many other opponents he would have faced, and exactly how battered he would otherwise have been. As Phelan J and the parties acknowledged [116], [167], Apo-ramipril [128], Alendronate 2012 FC 1418 [8], the complexity of the inquiry means that, as Lord Shaw pointed out in Watson Laidlaw (1914), 31 RPC 104, 117-118, "[t]he restoration by way of compensation is therefore accomplished to a large extent by the exercise of a sound imagination and the practice of the broad axe."
PANTOLOC / pantoprazole / 2,092,694 and 2,089,748
Phelan J’s Pantoprazole decision is the fourth decision on damages under s 8 of the NOC Regulations to go (almost) all the way to quantum, after the companion cases decided by Snider J, Teva-ramipril 2012 FC 552 and Apo-ramipril 2012 FC 553 (blogged here, here and here), and Hughes J’s Alendronate decision, 2012 FC 1235 (blogged here), supplementary reasons 2012 FC 1418 (blogged here). The legal questions relating to s 8 damages are well on their way to becoming established, but it is now apparent that the assessment of s 8 will require a complex and difficult factual inquiry. (The parties did not ask Phelan J to determine the quantum of damages, but only to settle some disputed issues which, it is hoped would allow the parties to arrive at a figure without the need to return to court.)
The general approach to s 8 damages set out in the cases, including Pantoprazole, is consistent with the “but for” approach to damages generally: damages are assessed as the difference between Apotex’s actual profits and the profits it would have made in the “but for” world in which it would not have been subject to the order of prohibition [14]. As discussed here, construction of the hypothetical world is almost entirely as a matter of determining what would in fact have happened but for the order of prohibition.
One established exception to this purely factual inquiry is that the FCA has held that the generic is not entitled to so-called springboard damages, on the basis that as a matter of statutory interpretation, losses incurred after the statutory period are not compensable as a matter of law even if they were in fact caused by the statutory stay: Merck Frosst Canada Ltd v Apotex Inc / alendronate (NOC) 2009 FCA 187.
A second legal question concerns the construction of the but for world. How do the NOC Regulations themselves apply in the but for world [33]? Should we assume that in the but for world the NOC Regulations do not exist at all? Should we assume that they do not exist for the s 8 claimant, but they exist for everyone else? Should we assume that they are fully operative even for the s 8 claimant, except that the statutory stay is not triggered? (That would imply that the s 8 claimant would still be required to file an NOA in the but for world.) Should we assume that the NOC Regulations do not exist for the section 8 claimant, and all other generics are prohibited from entering? All of these answers are equally consistent with the principle of “but for” compensation, because the question is how to construct the but for world itself. The Regulations do not answer this question directly. They tell us that the stay would not have been triggered in the but for world, but apart from that they do not tell us what parts of the Regulations would be effective. Section 8 states that the generic is entitled to recover “any loss suffered” during the period beginning on the date on which an NOC would have been issued “in the absence of these Regulations,” and in Teva-ramipril Teva argued that this means that in the but for world, the NOC Regulations would not exist at all. Snider J rejected this, noting that “the phrase ‘in the absence of these Regulations’ only modifies the certification date” [50]. That is, “in the absence of these Regulations” tells us when the start period is, not what the but for world is like.
Phelan J followed Snider J in holding that in the but for world, the generic does not have to file its NOA [35], [37], [Apo-ramipril [194]]. This is important to the damages calculation, because it means that the patentee will not be alerted to the possibility of generic entry by the NOA, and so will not have time to prepare to launch an AG, unless, on the facts, it would have known of the generic launch for some other reason [39].
However, while “in the hypothetical world, [the s 8 claimant] acts without the obligations and limitations of the Regulations” [40], all of the other generics are subject to the Regulations [56]: “Takeda does not enjoy the benefit of claiming that because Apotex was successful, all other generics are, for purposes of hypothetical world analysis, free to enter the market.” This is important to the damages calculation, because entry by other generics will cut the claimant’s profits. (Multiple generic entry may be bad for the patentee in the real world, but it is good for the patentee in the but for world.)
The question of how the NOC Regulations apply in the but for world is surely a question of law, and, as Phelan J noted, Apo-ramipril is under appeal, so the answer may change, but for now the answer is that the NOC Regulations are assumed not to apply to the claimant, but they do apply to all other market entrants. This seems to me to be as sensible an answer as any. As Snider J pointed out in Apo-ramipril [194], regulatory activity is generally kept confidential, so if the generic is assumed not to be subject to the stay, there is no reason for it to serve an NOA. On the other hand, the NOC Regulations cannot be assumed to be non-existent. Suppose generic A wins in its NOC proceedings, but generic B loses in its NOC proceedings relating to the same product, and so was subject to an order of prohibition. It seems wrong to suppose that generic B would have been able to enter the market for the purposes of generic A’s s 8 damages, when had tried and failed to obtain an NOC in respect of that very product. This was essentially what had happened in relation to Apotex’s entry as a second generic in Teva-ramipril, and this is why Snider J held that the other generics remained subject to the NOC Regulations [148]. The assumption that all generics except the s 8 claimant are prohibited from entry has the virtue of simplicity – the but for world will be easy to construct – but it would imply that multiple generics could get compensation from the same patentee in respect of the same drug, all on the basis that they would have been the sole generic.
It is the possibility of multiple generic entry that makes assessment of s 8 damage factually complex, as it is necessary to explore and dispute a number of possible but for worlds, in which various parties might have entered at various times. This is in contrast to a patent infringement action in which the patentee prevails; in that case, there is a single possible but for world, namely one in which everyone but the patentee is in the market. The NOC world is like a tort claim in which the defendant wrongly hit the plaintiff with a crippling blow, but we know that even in the absence of that wrong, several other, weaker, opponents would have legitimately entered the fray. We can’t make the easy assumption that but for the tort, the plaintiff would have been healthy; the question is how many other opponents he would have faced, and exactly how battered he would otherwise have been. As Phelan J and the parties acknowledged [116], [167], Apo-ramipril [128], Alendronate 2012 FC 1418 [8], the complexity of the inquiry means that, as Lord Shaw pointed out in Watson Laidlaw (1914), 31 RPC 104, 117-118, "[t]he restoration by way of compensation is therefore accomplished to a large extent by the exercise of a sound imagination and the practice of the broad axe."
Monday, December 16, 2013
Draft Trans-Pacific Partnership Treaty – Nagoya Protocol and Genetic Resources
The Nagoya Protocol to the Convention on Biological Diversity has been in the news lately as it
is currently on its way to being enacted into European Union legislation (see IPKat posts here
and here – and yes, I am the “Norman” who commented on those posts). So I’ve decided to post
some observations on the leaked draft TPP treaty proposed provisions dealing with genetic
resources, which I drafted in my spate of blogging on the TPP, but never got around to posting at
the time.
Understanding these provisions requires some background on the Nagoya Protocol to the Convention on Biological Diversity. The Nagoya Protocol mandates a system in which the benefits of exploitation of genetic resources are shared with the party providing that resource. The basic idea is nothing novel. If company A wants access to a novel organism or compound X owned by company B, A would normally enter into a material transfer agreement with B, which might well require A to pay B royalties on any patented invention derived from X. The Nagoya Protocol contemplates that if company A wants to, for example, go bioprospecting in the Amazon rain forest, it would get prior consent from a competent national authority (Art 13) and enter into an access and benefit sharing (ABS) agreement to share any benefits on mutually agreed terms (Art 5). Traditional knowledge is treated in a similar way. In other words, the effect is that countries would be deemed to own the genetic resources within their territory, and company A seeking to exploit those would contract with the national authority over the terms of access in the same way that it would contract with company B. A great deal of the Nagoya Protocol describes the structure of this contracting process.
Understanding these provisions requires some background on the Nagoya Protocol to the Convention on Biological Diversity. The Nagoya Protocol mandates a system in which the benefits of exploitation of genetic resources are shared with the party providing that resource. The basic idea is nothing novel. If company A wants access to a novel organism or compound X owned by company B, A would normally enter into a material transfer agreement with B, which might well require A to pay B royalties on any patented invention derived from X. The Nagoya Protocol contemplates that if company A wants to, for example, go bioprospecting in the Amazon rain forest, it would get prior consent from a competent national authority (Art 13) and enter into an access and benefit sharing (ABS) agreement to share any benefits on mutually agreed terms (Art 5). Traditional knowledge is treated in a similar way. In other words, the effect is that countries would be deemed to own the genetic resources within their territory, and company A seeking to exploit those would contract with the national authority over the terms of access in the same way that it would contract with company B. A great deal of the Nagoya Protocol describes the structure of this contracting process.
Wednesday, December 11, 2013
How High a Bar for Overruling Prior FCA Decisions?
Eli Lilly Canada Inc. v. Apotex Inc. / olanzapine (NOC) No.2 2013 FCA 282 Evans JA: Stratas,
Webb JJA aff’g 2010 FC 952 Gauthier J
Under the “no reach back” rule established in Apotex v Syntex / naproxen (NOC) 2010 FCA 155 aff’g 2009 FC 494 and re-affirmed in Pfizer Canada Inc. v Ratiopharm / amlodipine besylate (NOC) 2011 FCA 215 (blogged here) the Court will not reach back and retroactively set aside an order of prohibition obtained in an NOC proceeding solely because the patent has been held invalid in a subsequent action. The consequence is that the generic will not be entitled to damages under s 8 of the NOC Regulations, which is triggered by success in the NOC proceeding itself, even though it will have been held off the market by an invalid patent. (See here for my posts on related cases).
In this proceeding, Apotex asked the FCA to reconsider this rule. The FCA declined, on the basis of stare decisis:
It is interesting to contrast the “manifestly wrong” standard applied by the FCA in overruling its own decisions, with the standard set out by the SCC in Canada v. Craig, 2012 SCC 43 [24]-[28] for overruling the SCC’s own decisions. The SCC does not provide a rule, but rather (unsurprisingly, from the SCC) engages in “a balancing exercise between the two important values of correctness and certainty,” [27], giving “careful and respectful consideration” [26] to the earlier decision. This appears to be a significantly lower standard than “manifestly wrong.” That impression is confirmed by the result in Craig, which the SCC overruled a prior decision on the basis that it was wrong (though there was no suggestion that it was manifestly wrong), and there had been significant judicial and academic criticism of the prior decision.
Under the “no reach back” rule established in Apotex v Syntex / naproxen (NOC) 2010 FCA 155 aff’g 2009 FC 494 and re-affirmed in Pfizer Canada Inc. v Ratiopharm / amlodipine besylate (NOC) 2011 FCA 215 (blogged here) the Court will not reach back and retroactively set aside an order of prohibition obtained in an NOC proceeding solely because the patent has been held invalid in a subsequent action. The consequence is that the generic will not be entitled to damages under s 8 of the NOC Regulations, which is triggered by success in the NOC proceeding itself, even though it will have been held off the market by an invalid patent. (See here for my posts on related cases).
In this proceeding, Apotex asked the FCA to reconsider this rule. The FCA declined, on the basis of stare decisis:
[8] Because this Court is normally bound by its own decisions, Apotex can only
succeed in this appeal if it satisfies us that Syntex and Ratiopharm should not be followed
because they are "manifestly wrong" within the narrow meaning of Miller v. Canada
(Attorney General), 2002 FCA 370 at paras. 8, 10, and 22 (Miller). They were not per
incuriam, nor subsequently overruled or seriously attenuated by decisions of the Supreme
Court of Canada.
It is interesting to contrast the “manifestly wrong” standard applied by the FCA in overruling its own decisions, with the standard set out by the SCC in Canada v. Craig, 2012 SCC 43 [24]-[28] for overruling the SCC’s own decisions. The SCC does not provide a rule, but rather (unsurprisingly, from the SCC) engages in “a balancing exercise between the two important values of correctness and certainty,” [27], giving “careful and respectful consideration” [26] to the earlier decision. This appears to be a significantly lower standard than “manifestly wrong.” That impression is confirmed by the result in Craig, which the SCC overruled a prior decision on the basis that it was wrong (though there was no suggestion that it was manifestly wrong), and there had been significant judicial and academic criticism of the prior decision.
Friday, December 6, 2013
Broad Functional Biotech Claims in the BGH and EPO
Kluwer Patent Blog has a very interesting post by Dr Thorsten Bausch et al on a split between the
German Federal Court of Justice (Bundesgerichtshof) and the EPO on the validity of broad
functional claims. As the post describes it:
The EP patent was revoked by the EPO BoA, but the equivalent German patent was subsequently upheld by the BGH, which explicitly disagreed with the BoA decision. The authors provide an English translation of BGH decision, which cites extensively from German, UK and EPO case law. The BGH held, inter alia, that
one can paraphrase [the claim at issue] as "the use of DP IV inhibitors for the preparation
of a medicament for treating diabetes". The claimed inhibitors were not structurally
limited, just by their function. The description of the patent contained a single working
example with data. However, as the claims were so broad and Prof. Demuth's concept
proved to be unusually successful, it happened, unsurprisingly, that both patents were
opposed by various major pharmaceutical companies. Indeed, the patents were arguably
covering a whole new class of anti-diabetes drugs under development, which today are
collectively referred to as gliptins. Marketed actives of this class include Sitagliptin,
Vildagliptin and Saxagliptin.
The EP patent was revoked by the EPO BoA, but the equivalent German patent was subsequently upheld by the BGH, which explicitly disagreed with the BoA decision. The authors provide an English translation of BGH decision, which cites extensively from German, UK and EPO case law. The BGH held, inter alia, that
The fact that such a claim also covers compounds which do not yet exist, or which have
not yet been identified, does not give grounds for concern. If employing them makes use
of the invention, it does not matter if compounds are also covered which cannot be
identified without inventive activity.
There is no conflict between this and the fact that a functional definition of the feature
encompasses the use of currently unknown possibilities which might only be provided or
invented in the future, if this is the only way to ensure appropriate protection In such a
case, the invention is in principle sufficiently disclosed if it provides the skilled person
with at least one way of carrying it out.
Wednesday, November 27, 2013
Holding on Disclosure of Line of Reasonsing is Strictly Obiter
Bell Helicopter Textron Canada Limitée v. Eurocopter 2013 FCA 261 Mainville JA: Noël,
Trudel JJA refusing a motion for reconsideration of 2013 FCA 219
In previous litigation in this action, Eurocopter’s claims to helicopter landing gear with a forward offset front cross-piece had been held to be valid and infringed, but Claim 16, to landing gear with a backward offset front cross-piece, had been held invalid for lack of utility. In this motion under Rule 397, which permits reconsideration when “(a) the order does not accord with any reasons given for it; or (b) a matter that should have been dealt with has been overlooked or accidentally omitted,” Eurocopter has asked the FCA to modify two paragraphs of its reasons ([157]-[158]), in a way that Eurocopter apparently hoped would have the effect of reversing the judgment with respect to Claim 16, rendering that claim valid [4]. The FCA rejected this motion on the basis that (1), Rule 397 cannot be used to re-argue an issue [15]; (2) the paragraphs in question were not inadvertent and indeed were not incorrect [16]-[17]; and (3) the motion was pointless as even if the paragraphs in question were “corrected,” Claim 16 would still be invalid.
This last point is of some general interest. As I discussed in a post on the original FCA decision, the FCA held that the line of reasoning supporting sound prediction must be disclosed in the patent. If the decision has been amended as sought by Eurocopter, it would have held that the line of reasoning was indeed disclosed in the patent [4]. But the FCA noted that this would not have saved the claim, because Bell had brought evidence that the backward offset embodiment lacked utility, and “It would therefore have still been incumbent on Eurocopter to rebut that evidence through its own evidence of testing or through calculations supporting a sound line of reasoning for that embodiment at the time the `787 Patent was applied for. Eurocopter failed to do so. As a result, its cross-appeal would still fail” [18]. In other words, the FCA has recognized that its holding that the line of reasoning must be disclosed in the patent was obiter, because the more fundamental problem is that Eurocopter had not supplied any evidence of utility, whether in the patent or not. This is significant, as there is some suggestion of a disagreement at the FCA as to whether the heightened disclosure requirement in respect of sound prediction is sound, and to the extent that the holding in Eurocopter affirming this doctrine is obiter, it has less weight than if it were determinative. That is, it would be possible for a subsequent decision of the FCA to distinguish Eurocopter on this point as being obiter. With that said, there obiter, and there is obiter; while the Eurocopter panel of the FCA has acknowledged that its holding on this point was strictly obiter, it was clearly thoroughly considered, and so will not be lightly distinguished or ignored.
In previous litigation in this action, Eurocopter’s claims to helicopter landing gear with a forward offset front cross-piece had been held to be valid and infringed, but Claim 16, to landing gear with a backward offset front cross-piece, had been held invalid for lack of utility. In this motion under Rule 397, which permits reconsideration when “(a) the order does not accord with any reasons given for it; or (b) a matter that should have been dealt with has been overlooked or accidentally omitted,” Eurocopter has asked the FCA to modify two paragraphs of its reasons ([157]-[158]), in a way that Eurocopter apparently hoped would have the effect of reversing the judgment with respect to Claim 16, rendering that claim valid [4]. The FCA rejected this motion on the basis that (1), Rule 397 cannot be used to re-argue an issue [15]; (2) the paragraphs in question were not inadvertent and indeed were not incorrect [16]-[17]; and (3) the motion was pointless as even if the paragraphs in question were “corrected,” Claim 16 would still be invalid.
This last point is of some general interest. As I discussed in a post on the original FCA decision, the FCA held that the line of reasoning supporting sound prediction must be disclosed in the patent. If the decision has been amended as sought by Eurocopter, it would have held that the line of reasoning was indeed disclosed in the patent [4]. But the FCA noted that this would not have saved the claim, because Bell had brought evidence that the backward offset embodiment lacked utility, and “It would therefore have still been incumbent on Eurocopter to rebut that evidence through its own evidence of testing or through calculations supporting a sound line of reasoning for that embodiment at the time the `787 Patent was applied for. Eurocopter failed to do so. As a result, its cross-appeal would still fail” [18]. In other words, the FCA has recognized that its holding that the line of reasoning must be disclosed in the patent was obiter, because the more fundamental problem is that Eurocopter had not supplied any evidence of utility, whether in the patent or not. This is significant, as there is some suggestion of a disagreement at the FCA as to whether the heightened disclosure requirement in respect of sound prediction is sound, and to the extent that the holding in Eurocopter affirming this doctrine is obiter, it has less weight than if it were determinative. That is, it would be possible for a subsequent decision of the FCA to distinguish Eurocopter on this point as being obiter. With that said, there obiter, and there is obiter; while the Eurocopter panel of the FCA has acknowledged that its holding on this point was strictly obiter, it was clearly thoroughly considered, and so will not be lightly distinguished or ignored.
Friday, November 22, 2013
Draft Trans-Pacific Partnership Treaty – Data Protection
Unsurprisingly, data protection is being negotiated in the leaked draft TPP treaty. And also
unsurprisingly, the main debate is between the US, which proposes a fairly strong mandatory data
protection regime (Art E.16), a group of seven countries, including Canada, which propose
a weaker regime (“the majority proposal”) (Art E.XX.4), and the rest, who apparently would prefer
no data protection requirement at all. The notes indicate
that both Canada and Japan are considering the US proposal, which is not strictly inconsistent
with the majority proposal, as it sets a higher standard.
The gist of the US proposal is that when data is submitted for pharmaceutical marketing authorization for a new product, a third party cannot piggy back on that data for at least five years: E.16(a). If the chemical entity has previously been approved as part of another product, the period is reduced to three years: E.16(c). The majority proposal simply requires that such data be protected against “unfair commercial use.” No minimum period of data exclusivity is specified. Furthermore, under the majority proposal, the protection may be limited to new chemical entities – that is, no protection at all would be permitted if the chemical entity has been previously approved as part of another product, even if new data is required – and it may also be limited so that data protection is not available for new uses, or dosage forms, again, even if new data is required. There are also some other potential limitations on the data exclusivity. (Both proposals safeguard any measures necessary to implement the Doha Declaration on the TRIPS Agreement and Public Health.)
I am generally inclined to think that data protection is sound as a matter of policy. The argument for data protection is the same as the argument for intellectual property generally; the data is difficult and expensive to create (both proposals are limited to data “the origination of which involves a considerable effort”), and it is easy to copy, and without some form of protection no one will have an incentive to originate the data in the first place. Unlike patent protection, data protection does not have any requirement of an inventive step, but on the other hand, it does not provide a true monopoly either. In my view the inventive step requirement in patent law is designed to ensure that a monopoly is not granted over inventions that would have been independently developed in any event: Graham v John Deere Co, 383 US 1 at 11 (1966). Since data protection does not prevent applications for marketing authorization based on independently created data, this problem does not arise. On this logic, the potential exclusions for new uses of known entities, drugs that have not been approved in other formulations, or new dosages, are difficult to justify. If the data required significant effort to originate, and it is susceptible of piggy-backing, then it should be protected.
Of course, the bigger debate between the two positions is as to whether there should be a minimum period of data protection. If we accept the basic justification for data protection, which the majority proposal apparently does, then a minimum period of protection seems necessary in practice to make that protection effective.
The positions are set out below for convenience:
The gist of the US proposal is that when data is submitted for pharmaceutical marketing authorization for a new product, a third party cannot piggy back on that data for at least five years: E.16(a). If the chemical entity has previously been approved as part of another product, the period is reduced to three years: E.16(c). The majority proposal simply requires that such data be protected against “unfair commercial use.” No minimum period of data exclusivity is specified. Furthermore, under the majority proposal, the protection may be limited to new chemical entities – that is, no protection at all would be permitted if the chemical entity has been previously approved as part of another product, even if new data is required – and it may also be limited so that data protection is not available for new uses, or dosage forms, again, even if new data is required. There are also some other potential limitations on the data exclusivity. (Both proposals safeguard any measures necessary to implement the Doha Declaration on the TRIPS Agreement and Public Health.)
I am generally inclined to think that data protection is sound as a matter of policy. The argument for data protection is the same as the argument for intellectual property generally; the data is difficult and expensive to create (both proposals are limited to data “the origination of which involves a considerable effort”), and it is easy to copy, and without some form of protection no one will have an incentive to originate the data in the first place. Unlike patent protection, data protection does not have any requirement of an inventive step, but on the other hand, it does not provide a true monopoly either. In my view the inventive step requirement in patent law is designed to ensure that a monopoly is not granted over inventions that would have been independently developed in any event: Graham v John Deere Co, 383 US 1 at 11 (1966). Since data protection does not prevent applications for marketing authorization based on independently created data, this problem does not arise. On this logic, the potential exclusions for new uses of known entities, drugs that have not been approved in other formulations, or new dosages, are difficult to justify. If the data required significant effort to originate, and it is susceptible of piggy-backing, then it should be protected.
Of course, the bigger debate between the two positions is as to whether there should be a minimum period of data protection. If we accept the basic justification for data protection, which the majority proposal apparently does, then a minimum period of protection seems necessary in practice to make that protection effective.
The positions are set out below for convenience:
Thursday, November 21, 2013
Draft Trans-Pacific Partnership Treaty – Regulatory Review Exception
The leaked TPP treaty contemplates a regulatory review exception in Art E.13, but there is some
controversy over the scope. There is considerable debate over the precise wording (which makes the
annotated draft difficult to read), but main debate is over whether the exception should be
confined to getting marketing authorization for pharmaceuticals, or whether it should extend to any kind of
regulatory approval. The US proposal is representative of the more restrictive position, and
the Canadian proposal is representative of the broader position. I have parsed out their positions below, with
my underlining to highlight the differences. (No other countries support either of these positions
exactly, but several support each of them with some deviations.)
Draft Trans-Pacific Partnership Treaty – Written Description and Overbreadth
Two very different versions of Article E.9 are proposed in the leaked draft TPP treaty. The proposal of the US and Peru provides for a US-style written description requirement:
US version:
Australia proposes a very substantially different version:
All others except Japan oppose this provision. Japan is considering.
While this provision raises complex issues – this is a familiar refrain by now – in my view the Australian proposal is sound and desirable, while the US proposal verges on the absurd.
US version:
Article QQ.E.9
Each Party shall provide that a claimed invention is sufficiently supported by its
disclosure if the disclosure reasonably conveys to a person skilled in the art that the
applicant was in possession of the claimed invention as of the filing date.
Australia proposes a very substantially different version:
Article QQ.E.9
Each Party shall provide that a claimed invention shall be sufficiently supported by its
disclosure.
All others except Japan oppose this provision. Japan is considering.
While this provision raises complex issues – this is a familiar refrain by now – in my view the Australian proposal is sound and desirable, while the US proposal verges on the absurd.
Wednesday, November 20, 2013
Draft Trans-Pacific Partnership Treaty – Disclosure
Article E.8 of the leaked draft TPP treaty relates to the disclosure requirement. It is proposed by the
US, Australia and two others, and opposed by all others except Japan, which is still considering:
This provision essentially codifies the core disclosure requirement of Canadian law. This precise formulation is not commonly used by the Federal Courts. A more typical statement is that a specification is sufficient if a skilled worker can practice the invention, even if “routine trials and experiments not amounting to invention might be necessary to arrive at the desired result” (see eg 2010 FC 1265, [532]). But it is doubtful that there is any real difference between this and the “undue experimentation” formulation, which is often used by the PAB (see eg CD 1315).
While E.8 captures the core Canadian disclosure requirement, if, as appears on its face, this provision is intended to be an exhaustive definition of the disclosure requirement, then Canadian law would require amendment. For example, s 27(3)(c) has a best mode requirement, applicable at least to machines, and Professor Vaver is of the view that there is a more general best mode requirement in Canadian law: Vaver, Intellectual Property Law (2nd ed) at 343-44. Indeed, it is surprisingly difficult to define the Canadian disclosure requirement precisely. As the SCC noted in Supreme Court noted in Consolboard [1981] 1 SCR 504, 518, “[i]t cannot be said that [the disclosure section] of the Act is happily phrased. It gives the impression of a mélange of ideas gathered at random rather than an attempt to enunciate, clearly and concisely, a governing principle or principles.” This is illustrated by the recent confusing – dare I say confused? – decision of the SCC in Sildenafil 2012 SCC 60, in which the invalidity of the Viagra patent turned on the failure to disclose “the invention”: see my recent article “The Duty to Disclose ‘The Invention’: The Wrong Tool for the Job, (2013) 25 IPJ 269. It may be that Canada opposes E.8 to avoid having to amend and clarify the disclosure provision of our Act. In my view clarification of our disclosure provision is undoubtedly desirable. It might even turn out that paring down the requirement to something like E.8 would be the best solution; but a number of important substantive questions, such as whether a best mode requirement is desirable, would have to be addressed before we could arrive at that conclusion. If indeed E.8 is intended as an exhaustive disclosure requirement, I am not surprised at Canada’s opposition. Again, the problem is not that this particular issue is impossibly difficult to settle. Legislative reform never seems to happen without some kind of external pressure, and a trade negotiation is perhaps as good an occasion as any. The difficulty is that the TPP negotiations are raising a number of difficult issues, and I don’t see how they can all be satisfactorily addressed, especially without a more public consultation process.
According to FN 100 to Art E.8, Mexico and Singapore “are willing to accept the article provided that the sentence ‘without undue experimentation’ is deleted.” The effect of deleting these words depends on how the resultant provision is interpreted. It might be interpreted as implying the very stringent requirement found in some old English cases, that “the terms of a specification should express the invention in the clearest and most explicit manner; so that a man of science may be able to produce the thing intended without the necessity of trying experiments” Turner v Winter (1787) 99 ER 1274, 1277. Experience soon proved that this requirement was much too stringent, and a provision that required such disclosure would be unacceptable. The alternative, and more reasonable interpretation, is that there would still be room for some trials, and it is only the precise “undue experimentation” formulation that Mexico and Singapore find objectionable.
Article QQ.E.8
Each Party shall provide that a disclosure of a claimed invention shall be considered to be
sufficiently clear and complete if it provides information that allows the invention to be
made and used by a person skilled in the art, without undue experimentation, as of the
filing date.
This provision essentially codifies the core disclosure requirement of Canadian law. This precise formulation is not commonly used by the Federal Courts. A more typical statement is that a specification is sufficient if a skilled worker can practice the invention, even if “routine trials and experiments not amounting to invention might be necessary to arrive at the desired result” (see eg 2010 FC 1265, [532]). But it is doubtful that there is any real difference between this and the “undue experimentation” formulation, which is often used by the PAB (see eg CD 1315).
While E.8 captures the core Canadian disclosure requirement, if, as appears on its face, this provision is intended to be an exhaustive definition of the disclosure requirement, then Canadian law would require amendment. For example, s 27(3)(c) has a best mode requirement, applicable at least to machines, and Professor Vaver is of the view that there is a more general best mode requirement in Canadian law: Vaver, Intellectual Property Law (2nd ed) at 343-44. Indeed, it is surprisingly difficult to define the Canadian disclosure requirement precisely. As the SCC noted in Supreme Court noted in Consolboard [1981] 1 SCR 504, 518, “[i]t cannot be said that [the disclosure section] of the Act is happily phrased. It gives the impression of a mélange of ideas gathered at random rather than an attempt to enunciate, clearly and concisely, a governing principle or principles.” This is illustrated by the recent confusing – dare I say confused? – decision of the SCC in Sildenafil 2012 SCC 60, in which the invalidity of the Viagra patent turned on the failure to disclose “the invention”: see my recent article “The Duty to Disclose ‘The Invention’: The Wrong Tool for the Job, (2013) 25 IPJ 269. It may be that Canada opposes E.8 to avoid having to amend and clarify the disclosure provision of our Act. In my view clarification of our disclosure provision is undoubtedly desirable. It might even turn out that paring down the requirement to something like E.8 would be the best solution; but a number of important substantive questions, such as whether a best mode requirement is desirable, would have to be addressed before we could arrive at that conclusion. If indeed E.8 is intended as an exhaustive disclosure requirement, I am not surprised at Canada’s opposition. Again, the problem is not that this particular issue is impossibly difficult to settle. Legislative reform never seems to happen without some kind of external pressure, and a trade negotiation is perhaps as good an occasion as any. The difficulty is that the TPP negotiations are raising a number of difficult issues, and I don’t see how they can all be satisfactorily addressed, especially without a more public consultation process.
According to FN 100 to Art E.8, Mexico and Singapore “are willing to accept the article provided that the sentence ‘without undue experimentation’ is deleted.” The effect of deleting these words depends on how the resultant provision is interpreted. It might be interpreted as implying the very stringent requirement found in some old English cases, that “the terms of a specification should express the invention in the clearest and most explicit manner; so that a man of science may be able to produce the thing intended without the necessity of trying experiments” Turner v Winter (1787) 99 ER 1274, 1277. Experience soon proved that this requirement was much too stringent, and a provision that required such disclosure would be unacceptable. The alternative, and more reasonable interpretation, is that there would still be room for some trials, and it is only the precise “undue experimentation” formulation that Mexico and Singapore find objectionable.
Draft Trans-Pacific Partnership Treaty – Patentability of Methods of Medical Treatment
The leaked draft TPP treaty has a number of provisions concerning medically related claims. My last
posts dealt with second medical use claims, and a prohibition on any requirement of enhanced
efficacy for pharmaceuticals. This post deals with methods of medical treatment, addressed in
Art E.1(3)(b). I find the notation in this provision to be a bit confusing, but as I understand it, the
position of the parties is as follows:
US proposes that:
Others (including Canada, but excluding Japan) propose:
The majority position reflects in TRIPS Art 27(3)(a); and see also EPO Art 53(c). The basic question is whether this potential exclusion of methods of medical treatment should be maintained, or eliminated.
Japan opposes any provision, one way or the other, on this issue.
US proposes that:
3. Each Party shall make patents available for inventions for (b) diagnostic, therapeutic,
and surgical methods for the treatment of humans or animals if they cover a method of
using a machine, manufacture, or composition of matter
Others (including Canada, but excluding Japan) propose:
3. Each Party may exclude from patentability (b) diagnostic, therapeutic, and surgical
methods for the treatment of humans or animals.
The majority position reflects in TRIPS Art 27(3)(a); and see also EPO Art 53(c). The basic question is whether this potential exclusion of methods of medical treatment should be maintained, or eliminated.
Japan opposes any provision, one way or the other, on this issue.
Tuesday, November 19, 2013
Draft Trans-Pacific Partnership Treaty – Prohibition on Requiring Enhanced Efficacy of Pharmaceuticals
The leaked TPP treaty has a number of provisions concerning medically related claims. My last
post dealt with second medical use claims.This post deals with a proposed prohibition on any
requirement of enhanced efficacy for pharmaceuticals, which is addressed in Art E.1(1)(b). The
following provision is proposed by the US and Australia, and opposed by all others, except
Japan, which is still considering:
I don’t have a specific context for this, but on its face this provision is aimed at precluding national legislation which would require enhanced efficiency as an additional condition of patentability for pharmaceuticals, presumably in an attempt to deal with pharmaceutical patent “evergreening.”
Article QQ.E.1: {Patents / Patentable Subject matter}
1. The Parties confirm that:
(b) a Party may not deny a patent solely on the basis that the product did not result
in enhanced efficacy of the known product when the applicant has set forth
distinguishing features establishing that the invention is new, involves an
inventive step, and is capable of industrial application.
I don’t have a specific context for this, but on its face this provision is aimed at precluding national legislation which would require enhanced efficiency as an additional condition of patentability for pharmaceuticals, presumably in an attempt to deal with pharmaceutical patent “evergreening.”
Draft Trans-Pacific Partnership Treaty – Patentability of Second Medical Use Claims
The leaked TPP treaty has a number of provisions concerning medically related claims, in
particular second medical use claims, a prohibition on any requirement of enhanced efficacy for
pharmaceuticals, and claims related to methods of medical treatment. I will deal with these in
separate posts, beginning with second medical use claims, which are addressed in Art E.1(1)(a):
The US and Australia support this, Japan is considering, and all others, including Canada, oppose this provision. This most prominent impact of this provision would be to ensure that second medical use claims are patentable, though it would apply more broadly, to any second use of a known product.
It is not clear to me why Canada opposes this provision, as it would do no more than affirm existing law. That patents are available for new inventive uses of a known product is the central holding of Shell Oil [1982] 2 SCR 536. In Wellcome / AZT [2001] 1 FC 495 (FCA), Rothstein J, [72-75] applied Shell Oil to hold a second medical use claim (to the use of AZT for the treatment of HIV/AIDS) to be valid, and this was affirmed by 2002 SCC 77 [49-50].
With that said, there is a real controversy over second medical use claims in particular. The advantage of Swiss form claims, to the use of a known compound for the manufacture of a pharmaceutical composition for the new therapeutic application, is that it can encompass a new use for a known product, but only the manufacturer could be liable for infringement, and not a physician prescribing or administering the drug. Thus prohibiting patenting of a second medical use, while allowing Swiss form claims, allows physicians to treat their patients according to their best medical judgment, without fear of an infringement actions. An alternative approach to achieve the same end is to allow second medical use claims but provide a defence for physicians; this is the approach used is the US under 35 USC § 287(c)(1).
It is conceivable that this concern is driving the Canadian opposition to E.1(a), but this seems unlikely. Since E.1(a) reflects existing Canadian law, even if E.1(a) is not adopted, Canada would still have to amend the Patent Act if it wants to protect physicians by abolishing second medical use claims. If we are going to amend the Act for this purpose, surely the simpler approach would be to amend it to provide for a US-style defence, which addresses the root problem directly. Further, it is not clear that TPP members would be required to allow Swiss form claims in the absence of E.1(a), since it could be said that functionally, Swiss form claims do provide patents for new uses of a known product, even though there is an important substantive difference between Swiss form claims and second medical use claims as such. And in any event, this argument respecting second medical use claims does not apply to second use claims more generally; for example, the invention at issue in Shell Oil was for a use as a plant growth regulator. This obviously does not raise concerns about physician’s freedom to treat their patients. It may be that Canada’s opposition to this provision is driven by its broader negotiating strategy, rather than opposition to this provision in particular.
Article QQ.E.1: {Patents / Patentable Subject matter}
1. The Parties confirm that:
(a) patents shall be available for any new uses or methods of using a known
product,
The US and Australia support this, Japan is considering, and all others, including Canada, oppose this provision. This most prominent impact of this provision would be to ensure that second medical use claims are patentable, though it would apply more broadly, to any second use of a known product.
It is not clear to me why Canada opposes this provision, as it would do no more than affirm existing law. That patents are available for new inventive uses of a known product is the central holding of Shell Oil [1982] 2 SCR 536. In Wellcome / AZT [2001] 1 FC 495 (FCA), Rothstein J, [72-75] applied Shell Oil to hold a second medical use claim (to the use of AZT for the treatment of HIV/AIDS) to be valid, and this was affirmed by 2002 SCC 77 [49-50].
With that said, there is a real controversy over second medical use claims in particular. The advantage of Swiss form claims, to the use of a known compound for the manufacture of a pharmaceutical composition for the new therapeutic application, is that it can encompass a new use for a known product, but only the manufacturer could be liable for infringement, and not a physician prescribing or administering the drug. Thus prohibiting patenting of a second medical use, while allowing Swiss form claims, allows physicians to treat their patients according to their best medical judgment, without fear of an infringement actions. An alternative approach to achieve the same end is to allow second medical use claims but provide a defence for physicians; this is the approach used is the US under 35 USC § 287(c)(1).
It is conceivable that this concern is driving the Canadian opposition to E.1(a), but this seems unlikely. Since E.1(a) reflects existing Canadian law, even if E.1(a) is not adopted, Canada would still have to amend the Patent Act if it wants to protect physicians by abolishing second medical use claims. If we are going to amend the Act for this purpose, surely the simpler approach would be to amend it to provide for a US-style defence, which addresses the root problem directly. Further, it is not clear that TPP members would be required to allow Swiss form claims in the absence of E.1(a), since it could be said that functionally, Swiss form claims do provide patents for new uses of a known product, even though there is an important substantive difference between Swiss form claims and second medical use claims as such. And in any event, this argument respecting second medical use claims does not apply to second use claims more generally; for example, the invention at issue in Shell Oil was for a use as a plant growth regulator. This obviously does not raise concerns about physician’s freedom to treat their patients. It may be that Canada’s opposition to this provision is driven by its broader negotiating strategy, rather than opposition to this provision in particular.
Monday, November 18, 2013
Draft Trans-Pacific Partnership Treaty – Patentability of Biological Subject Matter
This post deals with Article E.1(3)(a),(c) of the leaked TPP treaty. The issue being negotiated is
whether the potential exclusions from patentability set out in TRIPS Art 27(3)(b) should be
maintained, removed, or altered. The TRIPS article is as follows:
The draft TPP splits this into separate paragraphs dealing with (a) plants and animals, and (c) essentially biological processes for the production of plants and animals.
I find the notation to this provision a bit confusing, but as I understand it, the US proposes that both potential exclusions would be eliminated:
Ten countries, including Canada (Japan’s position is not noted), propose that (the “majority proposal”):
In the alternative, five countries, including Canada, propose that the TRIPS potential exclusions be maintained as is (the “alternative proposal”):
The difference between the majority proposal and the alternative is that the majority proposal would not explicitly require that parties provide an effective alternative to patent protection for plant varieties. However, since all of the TPP countries are WTO members, they would be bound be the TRIPS provision in any event, unless they qualify for the LDC transitional extension. So, it may be that the effect of the alternative would be to require LDCs to provide for an effective system of plant protection under TPP even if not required to do so under TRIPS. However, this may be parsing the draft too finely; the leaked draft simply provides notes, and the negotiators would understand more clearly the implications of the alternatives.
I will discuss in turn the paragraphs relating to higher life forms and essentially biological processes.
27(3). Members may also exclude from patentability: (b) plants and animals other than
micro-organisms, and essentially biological processes for the production of plants or
animals other than non-biological and microbiological processes. However, Members
shall provide for the protection of plant varieties either by patents or by an effective sui
generis system or by any combination thereof.
The draft TPP splits this into separate paragraphs dealing with (a) plants and animals, and (c) essentially biological processes for the production of plants and animals.
I find the notation to this provision a bit confusing, but as I understand it, the US proposes that both potential exclusions would be eliminated:
3. Each Party shall make patents available for inventions for
(a) plants and animals
(c) essentially biological processes for the production of plants or animals, other
than non-biological and microbiological processes for such production
Ten countries, including Canada (Japan’s position is not noted), propose that (the “majority proposal”):
3. Each Party may exclude from patentability
(a) plants and animals, other than microorganisms
(c) essentially biological processes for the production of plants or animals, other
than non-biological and microbiological processes for such production
In the alternative, five countries, including Canada, propose that the TRIPS potential exclusions be maintained as is (the “alternative proposal”):
3. Each Party may also exclude from patentability
(b) plants and animals other than microorganisms, and
essentially biological processes for the production of plants or animals other than
nonbiological and microbiological processes.
However, Parties shall provide for the protection of plant varieties either by patents or by
an effective sui generis system or by any combination thereof.
The difference between the majority proposal and the alternative is that the majority proposal would not explicitly require that parties provide an effective alternative to patent protection for plant varieties. However, since all of the TPP countries are WTO members, they would be bound be the TRIPS provision in any event, unless they qualify for the LDC transitional extension. So, it may be that the effect of the alternative would be to require LDCs to provide for an effective system of plant protection under TPP even if not required to do so under TRIPS. However, this may be parsing the draft too finely; the leaked draft simply provides notes, and the negotiators would understand more clearly the implications of the alternatives.
I will discuss in turn the paragraphs relating to higher life forms and essentially biological processes.
Thursday, November 14, 2013
TPP - Competition Issues
The recently leaked draft shows that Trans-Pacific Partnership treaty has the potential to have a major impact on
patent law, to a significantly greater extent than CETA or ACTA, as a number of issues that are
both fundamental and controversial are being negotiated. In this and subsequent posts I will
highlight some of these proposed provisions, with some suggestions as to their potential
implications. This post will deal with issues related to competition law. I should emphasize that all my comments are tentative, both because I may not be
interpreting the provision properly, and because I have not had time to fully assess the law to the
extent necessary to provide a thorough commentary. Nor are my comments a comprehensive
review of the draft treaty. I will deal with those provisions which strike me as particularly
interesting. There are a number of proposals which may be both controversial and of a significant
practical impact, which I will not discuss. In the extracts below I have edited the draft provisions
for clarity, sometimes omitting substantive material. Consequently, the excerpts and my
discussion may not fully reflect the proposal or the position of the parties. Please refer to the
original leaked draft before drawing your own conclusions.
Wednesday, November 6, 2013
Does Canada Really Follow the “English Rule” for Costs?
ABB Technology AG v Hyundai Heavy Industries Co, Ltd 2013 FC 1050 Barnes J
Cost-shifting has been big news lately in the US as a way of discouraging patent trolls, and in conversation I have heard it suggested that trolls are not a major problem in Canada because we follow the “English rule,” that costs follow the cause. There is a real debate as to whether the English rule actually deters trolls – my intuition is that it might deter trolls who are asserting weak patents for nuisance value settlement, but it is unlikely to deter trolls who are asserting strong and important patents that impact major markets. (And see this IPKat report of the debate being joined in Europe.)
But a more basic question from a Canadian perspective is raised by this costs award in ABB Tech v Hyundai: do we really follow the English rule? In ABB Tech v Hyundai 2013 FC 947 (blogged here), the defendant Hyundai was entirely successful: the plaintiff’s action was dismissed and both patents in issue were declared invalid. The defendant’s actual legal costs exclusive of disbursements, were $2,809,161 [2]. Costs calculated at the middle of Column III would have been $75,337 – less than 3% of actual costs [3]. Costs at the top of Column IV, which seems to be the norm in hard-fought patent cases, would have been $289,495, or just over 10% of actual costs. In the end, Barnes J felt that a premium even above Column IV was warranted [4], and he awarded $350,000 [8] – which is 12.5% of actual costs.
Readers in practice will know whether these numbers are representative of costs awards generally, but they are at least generally consistent with what I have seen in other costs decisions in which actual costs were disclosed. Barnes J confirmed this in his remark that “This case exemplifies the growing disparity between the Federal Court tariff and the actual costs of patent litigation” [4]. Barnes J continued to say, “but that [disparity] alone is not a basis for departing wholly from the tariff in assessing costs. If it were otherwise the tariff would rarely, if ever, be used in cases of this type.” I think this is right. Rule 400(1) does state that “The Court shall have full discretionary power over the amount and allocation of costs and the determination of by whom they are to be paid,” and the Court has already exercised that discretion in systematically departing from the prima facie rule of Col III that is set out in Rule 407, in favour of the top end of Column IV. But in order to maintain consistency and predictability, a complete departure from the tariff is a policy matter that should be implemented deliberately, rather than by the exercise of the discretion of individual judges.
Perhaps it is time for a deliberate reconsideration of the costs rules. It seems to me that now we don’t really follow the English rule in a functional sense. We have a hybrid in which costs awards are big enough to fight over (thus increasing costs), but not big enough to make any difference to litigation strategy. That may be the worst of both worlds.
Cost-shifting has been big news lately in the US as a way of discouraging patent trolls, and in conversation I have heard it suggested that trolls are not a major problem in Canada because we follow the “English rule,” that costs follow the cause. There is a real debate as to whether the English rule actually deters trolls – my intuition is that it might deter trolls who are asserting weak patents for nuisance value settlement, but it is unlikely to deter trolls who are asserting strong and important patents that impact major markets. (And see this IPKat report of the debate being joined in Europe.)
But a more basic question from a Canadian perspective is raised by this costs award in ABB Tech v Hyundai: do we really follow the English rule? In ABB Tech v Hyundai 2013 FC 947 (blogged here), the defendant Hyundai was entirely successful: the plaintiff’s action was dismissed and both patents in issue were declared invalid. The defendant’s actual legal costs exclusive of disbursements, were $2,809,161 [2]. Costs calculated at the middle of Column III would have been $75,337 – less than 3% of actual costs [3]. Costs at the top of Column IV, which seems to be the norm in hard-fought patent cases, would have been $289,495, or just over 10% of actual costs. In the end, Barnes J felt that a premium even above Column IV was warranted [4], and he awarded $350,000 [8] – which is 12.5% of actual costs.
Readers in practice will know whether these numbers are representative of costs awards generally, but they are at least generally consistent with what I have seen in other costs decisions in which actual costs were disclosed. Barnes J confirmed this in his remark that “This case exemplifies the growing disparity between the Federal Court tariff and the actual costs of patent litigation” [4]. Barnes J continued to say, “but that [disparity] alone is not a basis for departing wholly from the tariff in assessing costs. If it were otherwise the tariff would rarely, if ever, be used in cases of this type.” I think this is right. Rule 400(1) does state that “The Court shall have full discretionary power over the amount and allocation of costs and the determination of by whom they are to be paid,” and the Court has already exercised that discretion in systematically departing from the prima facie rule of Col III that is set out in Rule 407, in favour of the top end of Column IV. But in order to maintain consistency and predictability, a complete departure from the tariff is a policy matter that should be implemented deliberately, rather than by the exercise of the discretion of individual judges.
Perhaps it is time for a deliberate reconsideration of the costs rules. It seems to me that now we don’t really follow the English rule in a functional sense. We have a hybrid in which costs awards are big enough to fight over (thus increasing costs), but not big enough to make any difference to litigation strategy. That may be the worst of both worlds.
Monday, October 28, 2013
Is a Dosage Range Unpatentable as Being a Method of Medical Treatment?
Bayer Inc v Cobalt Pharmaceuticals Company / drospirenone (NOC) 2013 FC 1061 Hughes J
YAZ / drospirenone / 2,179,728
As noted in my overview post, the Drospirenone decision is notable primarily as a development in the law relating to the patentability of methods of medical treatment, as Hughes J held four of the five claims at issue to be invalid on this basis.
Claims 1, 2, 6,7 and 8 were at issue [124]. All but Claim 8 were held to be invalid [162]. Claim 1, which is representative of the invalid claims, was as follows:
Claim 2 restricted the estragen to ethinylestradiol, Claim 6 restricted the gestagen to one of the two listed in Claim 1, and Claim 7 was similar to Claim 1, but with somewhat more restricted dose ranges [158].
Claim 8, held to be valid, was as follows:
As noted by Hughes J, in contrast with the first four claims, “Claim 8 is restricted to a single dosage (not a range) of one of two estrogens; and a single dosage, not a range, of one of three gestagens” [159].
After referring to his Cobalt / zoledronate (NOC) 2013 FC 985 decision (blogged here) as summarizing the law, Hughes J held Claim 1, 2, 6 and 7 invalid for the following reasons (my emphasis):
Hughes J evidently wrote Cobalt / zoledronate with Drospirenone in mind, so the contrast between Claim 8 and the other four claims is directly reflected in the second pair of contrasting claims he identified at [91]-[92] of that decision:
From this, it follows directly that Claim 8 is patentable while the others are unpatentable. Drospirenone is helpful in explaining why Hughes J is of the view that claims to a dosage range are unpatentable, namely that “they provide for a choice to be made by those prescribing or providing contraceptive drugs to choose between a variety of components and a variety of dosage ranges” [162]. The implication is that by providing for a choice to be made, this implicates the professional skill of the prescribing doctor: (and see [161]).
I see two problems with this analysis. First, there is a distinction between a patent which requires the use of professional skill to practice the invention, and one in which professional skill may be exercised, but is not required, while practicing the invention. In Drospirenone, Hughes J held the claims to be useful, which implies that any combination with the specified range would work as an effective contraceptive. Professional skill might be exercised in practising the invention, to reduce side effects, for example, but in principle professional skill is not necessary to practice the invention effectively. Consider an analogy to a selection patent, in which the genus patent specifies that a broad range of compounds is effective for a particular purpose. It might well require professional skill, whether that of a doctor or engineer, depending on the patent, to get the most out of the invention; and if sufficient skill is required in choosing the best species, this might even be the basis for a valid selection patent. But the fact that professional skill is normally exercised in the practice of the genus patent, does not make the genus patent invalid. In this case, the patent does not “provide” for a choice to be made, in the sense of requiring a choice to practice the invention effectively, but rather it allows for a choice to be made. Put another way, elsewhere in this decision, Hughes J accepted that the word “about” is not vague and implies a range of about 10% around the specified value [103-06]. It would be possible to cover the entire range specified by Claim 1, by claims framed similarly to Claim 8, except to dosages “about” a single dosage. While this would require a very large number of claims, the difference between this multiplicity of specific dosage claims, and a single claim to a range of dosages, is purely formal. In summary, many patentable inventions allow for the exercise of professional skill in their implementation, and this alone does not make the claims invalid. While Claim 1 certainly allows for the exercise of professional skill, it does not seem to me to require it.
Moreover, even the suggestion that a claim is invalid if it requires the exercise of medical skill, is very difficult to reconcile with Wellcome / AZT 2002 SCC 77 which upheld a Claim 22 to the use of “an effective amount” of AZT. Surely choosing an effective amount of AZT implicates the professional skill of a doctor or pharmacist just as much as choosing from a specified range. Indeed, more skill is required by the AZT claim, because, as just noted, in this case any selection within the range specified by the ‘728 patent would work, whereas in the AZT claim, professional skill must be exercised to select an effective amount. (See also my post on Cobalt / zoledronate, making a similar point.)
More broadly, what is wrong with a claim which requires the exercise of professional skill? Many claims are of this nature, and the question is normally treated as one of sufficiency. It is well established that a claim requiring the exercise of professional skill is not invalid for that reason, so long as undue experimentation is not required. As discussed in my previous post, there may be a sense that the exercise of professional skill is inherently nebulous, but if that is the real objection, it should be dealt with directly, by invalidating for insufficiency or ambiguity, claims where the professional skill required by the claim is of a nature that is not described or cannot be reliably replicated.
If the objection relates to the exercise of medical skill in particular, we must ask what distinguishes medical skill from other professional skills. One answer is that there is a policy argument to be made that a physician should not be prevented from treating her patient to the best of her ability by fear of a patent action. But if that is the real objection, the better response is to address it directly, by providing a defence for physicians, as in the US under 35 USC § 287(c)(1). That is surely a policy decision for the legislature; and in any event, this policy goal is not aided by Hughes J’s distinction between dosage ranges and a single dosage; to the extent that the compositions encompassed by any of the Claims are “used” by the prescribing physician, allowing claims to specific dosages exposes physicians to liability; Claim 8 would be infringed by a physician who determines that the dosage specified by that claim is appropriate for her patient.
Ultimately, it seems to me that the distinction between a dosage range and a specific dosage is a formalism which lacks a a clear policy rationale, and is inconsistent with Wellcome / AZT.
It is also very disappointing to see the apparent resurrection, both in this decision [162] and in Cobalt / zolendronate and the case-law discussed therein, of the long-discredited “vendible product” test for patentable subject matter. This test was created by Morton J in Re GEC's Application, (1942) 60 RPC 1 at 4, where he stated that “a method or process is a manner of manufacture if it (a) results in the production of some vendible product or (b) improves or restores to its former condition a vendible product or (c) has the effect of preserving from deterioration some vendible product to which it is applied.” The list is curiously specific, if it is an attempt to reconcile difficult cases on narrow factual grounds – though Morton J did not cite specific authority for this proposition, referring merely to “cases cited to me”. But it is more bluntly described as legal gerrymandering, aimed at reaching a particular result on the facts. There is no unifying principle, either stated or apparent. While the phrase “vendible product” is repeated, it is not truly a unifying concept, as not every invention that affects a vendible product is patentable; only certain effects are within the scope of the rule. In particular, on the facts of the case, Morton J held that using a known compound for extinguishing a fire did not fall within the rule as stated, apparently because preserving a vendible product from fire does not amount to “preserving from deterioration.” This invisibly fine distinction was evidently developed for the purpose of allowing Morton J to hold the invention unpatentable. The application at issue was for a patent on a method of extinguishing incendiary bombs by means of a concentrated aqueous solution of a known substance (zinc chloride). Legal realism provides the most obvious explanation for the rule: the case was decided in the middle of World War II, just after the Blitz, and Morton J did not want the inventor to be able to hold London to ransom. While this is no doubt a reasonable concern, it does not warrant re-writing the law of patentable subject matter. In Canada today, this concern could be addressed by s 19 of the Act.
Regardless of the explanation for Morton J’s decision in Re GEC's Application, it is no longer good law. Morton J held that the claims in question on the basis that they were “nothing more than claims for a new use of an old substance, such use not being, in my view, a manner of manufacture.” This holding, which was made immediately after his statement of the vendible production rule, and which is apparently his application of that rule on the facts, is directly inconsistent with Shell Oil, [1982] 2 SCR 536, the leading SCC decision on patentable subject matter, which upheld the patentability of a new use for an old compound. Even prior to that, the vendible product rule itself has been effectively expunged from the law by the penetrating analysis of the High Court of Australia in NRDC (1961) 102 CLR 252 (HCA). For more discussion of the vendible product rule, see my article, The Rule Against Abstract Claims: History and Principles, 26 CIPR 205 at 224-25 (draft version here).
YAZ / drospirenone / 2,179,728
As noted in my overview post, the Drospirenone decision is notable primarily as a development in the law relating to the patentability of methods of medical treatment, as Hughes J held four of the five claims at issue to be invalid on this basis.
Claims 1, 2, 6,7 and 8 were at issue [124]. All but Claim 8 were held to be invalid [162]. Claim 1, which is representative of the invalid claims, was as follows:
1. Use of an oral dosage form comprising an estrogen selected from
2.0 to 6.0 mg of 17-estradiol and
0.015 to 0.020 mg of ethinylestradiol;
and a gestagen selected from
0.05 to 0.075 mg of gestodene,
0.075 to 0.125 mg of levonorgestrel,
0.06 to 0.15 mg of desogestrel,
0.06 to 0.15 mg of 3-ketodesogestrel,
0.2 to 0.3 mg of norgestimate,
>0.35 to 0.75 mg of norethisterone,
0.1 mg of drospirenone to a drospirenone dose equivalent to 0.075 mg of
gestodene, and
0.1 mg of cyproterone acetate to a cyproterone acetate dose equivalent to 0.075
mg of gestodene;
for contraception for a female of reproductive age who has not yet reached
premenopause, by administration of the form of dosage for 23 or 24 days, beginning on
day one of the menstrual cycle, followed by 5 or 4 pill-free or placebo pill days, for a total
of 28 days in the administration cycle.
Claim 2 restricted the estragen to ethinylestradiol, Claim 6 restricted the gestagen to one of the two listed in Claim 1, and Claim 7 was similar to Claim 1, but with somewhat more restricted dose ranges [158].
Claim 8, held to be valid, was as follows:
8. Use according to claim 1, whereby the estrogen is present in a dose of 20 µg of
ethinylestradiol or an equivalent dose of 17-estradiol and the gestagen is present in a dose
of 75 µg of gestodene or an equivalent dose of levonorgestrel, cyproterone acetate or
drospirenone.
As noted by Hughes J, in contrast with the first four claims, “Claim 8 is restricted to a single dosage (not a range) of one of two estrogens; and a single dosage, not a range, of one of three gestagens” [159].
After referring to his Cobalt / zoledronate (NOC) 2013 FC 985 decision (blogged here) as summarizing the law, Hughes J held Claim 1, 2, 6 and 7 invalid for the following reasons (my emphasis):
[160 In the present case, all claims are clearly expressed in terms of use for a
contraceptive. All claims except claim 8 provide for a range of dosages for one or both of
the estrogen and gestagen components.
[162] The
point, however, is not whether a commercial product is provided with
fixed
dosages and regimens. The point is, what do the claims say? All claims
at issue are use
claims, not product claims. All but claim 8 claim the use as a
contraceptive of a two-component drug with each component to be selected
from a choice of components, and
with each component to be furnished at a dosage within a range of
dosages. Claims 1, 2, 6
and 7 are not proper subject matter for a Canadian patent, as they do
not claim a vendible
product; they provide for a choice to be made by those prescribing or providing
contraceptive drugs to choose between a variety of components and a variety of dosage
ranges. Only claim 8 survives, as it is directed to a single dosage of each of two
compounds.
Hughes J evidently wrote Cobalt / zoledronate with Drospirenone in mind, so the contrast between Claim 8 and the other four claims is directly reflected in the second pair of contrasting claims he identified at [91]-[92] of that decision:
• the substance X in the form of a 5 mg tablet for the treatment of Y [patenable]
• the use of substance X in a dosage range between A and B for the treatment of X
[unpatentable].
From this, it follows directly that Claim 8 is patentable while the others are unpatentable. Drospirenone is helpful in explaining why Hughes J is of the view that claims to a dosage range are unpatentable, namely that “they provide for a choice to be made by those prescribing or providing contraceptive drugs to choose between a variety of components and a variety of dosage ranges” [162]. The implication is that by providing for a choice to be made, this implicates the professional skill of the prescribing doctor: (and see [161]).
I see two problems with this analysis. First, there is a distinction between a patent which requires the use of professional skill to practice the invention, and one in which professional skill may be exercised, but is not required, while practicing the invention. In Drospirenone, Hughes J held the claims to be useful, which implies that any combination with the specified range would work as an effective contraceptive. Professional skill might be exercised in practising the invention, to reduce side effects, for example, but in principle professional skill is not necessary to practice the invention effectively. Consider an analogy to a selection patent, in which the genus patent specifies that a broad range of compounds is effective for a particular purpose. It might well require professional skill, whether that of a doctor or engineer, depending on the patent, to get the most out of the invention; and if sufficient skill is required in choosing the best species, this might even be the basis for a valid selection patent. But the fact that professional skill is normally exercised in the practice of the genus patent, does not make the genus patent invalid. In this case, the patent does not “provide” for a choice to be made, in the sense of requiring a choice to practice the invention effectively, but rather it allows for a choice to be made. Put another way, elsewhere in this decision, Hughes J accepted that the word “about” is not vague and implies a range of about 10% around the specified value [103-06]. It would be possible to cover the entire range specified by Claim 1, by claims framed similarly to Claim 8, except to dosages “about” a single dosage. While this would require a very large number of claims, the difference between this multiplicity of specific dosage claims, and a single claim to a range of dosages, is purely formal. In summary, many patentable inventions allow for the exercise of professional skill in their implementation, and this alone does not make the claims invalid. While Claim 1 certainly allows for the exercise of professional skill, it does not seem to me to require it.
Moreover, even the suggestion that a claim is invalid if it requires the exercise of medical skill, is very difficult to reconcile with Wellcome / AZT 2002 SCC 77 which upheld a Claim 22 to the use of “an effective amount” of AZT. Surely choosing an effective amount of AZT implicates the professional skill of a doctor or pharmacist just as much as choosing from a specified range. Indeed, more skill is required by the AZT claim, because, as just noted, in this case any selection within the range specified by the ‘728 patent would work, whereas in the AZT claim, professional skill must be exercised to select an effective amount. (See also my post on Cobalt / zoledronate, making a similar point.)
More broadly, what is wrong with a claim which requires the exercise of professional skill? Many claims are of this nature, and the question is normally treated as one of sufficiency. It is well established that a claim requiring the exercise of professional skill is not invalid for that reason, so long as undue experimentation is not required. As discussed in my previous post, there may be a sense that the exercise of professional skill is inherently nebulous, but if that is the real objection, it should be dealt with directly, by invalidating for insufficiency or ambiguity, claims where the professional skill required by the claim is of a nature that is not described or cannot be reliably replicated.
If the objection relates to the exercise of medical skill in particular, we must ask what distinguishes medical skill from other professional skills. One answer is that there is a policy argument to be made that a physician should not be prevented from treating her patient to the best of her ability by fear of a patent action. But if that is the real objection, the better response is to address it directly, by providing a defence for physicians, as in the US under 35 USC § 287(c)(1). That is surely a policy decision for the legislature; and in any event, this policy goal is not aided by Hughes J’s distinction between dosage ranges and a single dosage; to the extent that the compositions encompassed by any of the Claims are “used” by the prescribing physician, allowing claims to specific dosages exposes physicians to liability; Claim 8 would be infringed by a physician who determines that the dosage specified by that claim is appropriate for her patient.
Ultimately, it seems to me that the distinction between a dosage range and a specific dosage is a formalism which lacks a a clear policy rationale, and is inconsistent with Wellcome / AZT.
It is also very disappointing to see the apparent resurrection, both in this decision [162] and in Cobalt / zolendronate and the case-law discussed therein, of the long-discredited “vendible product” test for patentable subject matter. This test was created by Morton J in Re GEC's Application, (1942) 60 RPC 1 at 4, where he stated that “a method or process is a manner of manufacture if it (a) results in the production of some vendible product or (b) improves or restores to its former condition a vendible product or (c) has the effect of preserving from deterioration some vendible product to which it is applied.” The list is curiously specific, if it is an attempt to reconcile difficult cases on narrow factual grounds – though Morton J did not cite specific authority for this proposition, referring merely to “cases cited to me”. But it is more bluntly described as legal gerrymandering, aimed at reaching a particular result on the facts. There is no unifying principle, either stated or apparent. While the phrase “vendible product” is repeated, it is not truly a unifying concept, as not every invention that affects a vendible product is patentable; only certain effects are within the scope of the rule. In particular, on the facts of the case, Morton J held that using a known compound for extinguishing a fire did not fall within the rule as stated, apparently because preserving a vendible product from fire does not amount to “preserving from deterioration.” This invisibly fine distinction was evidently developed for the purpose of allowing Morton J to hold the invention unpatentable. The application at issue was for a patent on a method of extinguishing incendiary bombs by means of a concentrated aqueous solution of a known substance (zinc chloride). Legal realism provides the most obvious explanation for the rule: the case was decided in the middle of World War II, just after the Blitz, and Morton J did not want the inventor to be able to hold London to ransom. While this is no doubt a reasonable concern, it does not warrant re-writing the law of patentable subject matter. In Canada today, this concern could be addressed by s 19 of the Act.
Regardless of the explanation for Morton J’s decision in Re GEC's Application, it is no longer good law. Morton J held that the claims in question on the basis that they were “nothing more than claims for a new use of an old substance, such use not being, in my view, a manner of manufacture.” This holding, which was made immediately after his statement of the vendible production rule, and which is apparently his application of that rule on the facts, is directly inconsistent with Shell Oil, [1982] 2 SCR 536, the leading SCC decision on patentable subject matter, which upheld the patentability of a new use for an old compound. Even prior to that, the vendible product rule itself has been effectively expunged from the law by the penetrating analysis of the High Court of Australia in NRDC (1961) 102 CLR 252 (HCA). For more discussion of the vendible product rule, see my article, The Rule Against Abstract Claims: History and Principles, 26 CIPR 205 at 224-25 (draft version here).
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