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.
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