The Complexities of Comity and Stare Decisis

Bayer Inc v Apotex Inc 2016 FC 1013 Fothergill J
            2,382,426 / micronized drospirenone / YAZ YASMIN

As noted in yesterday’s post Bayer’s ‘426 patent covers an oral contraceptive comprising drospirenone and ethinylestradiol, where the drospirenone is in the form of fast dissolving particles. The claims of the ‘426 had previously been construed by Hughes J and the FCA in the prior NOC proceedings: Bayer v Cobalt 2013 FC 1061 J aff’d 2015 FCA 116 (blogged here). This raised the question of the extent to which Fothergill J was bound to follow the claim construction arrived at by Hughes J (on the basis of comity) and the FCA (on the basis of stare decisis) [45].

Bayer argued that Fothergill J should adhere to the FCA’s construction “unless the evidence demonstrates the prior construction was wrong, or if different evidence compels a different result” [46], relying on Allergan 2012 FCA 308, [44] (here). This position is in some ways surprisingly modest. Allergan did state that test, but in the context of comity, which governs the relationship between courts of the same level. As noted in Pfizer 2014 FCA 250 [59] (here) (also relied on by Bayer), claim construction is a matter of law, and stare decisis implies that a subsequent lower court should be strictly bound by a holding of law by a higher court. On the other hand, Cobalt and Apotex pointed out that because of their summary nature, even holdings of law in an NOC proceedings are arguably not strictly binding at all in a subsequent infringement action: Lilly v Novopharm / nizatidine [1998] 2 SCR 129 [95]-[96]; Lilly v Novopharm /olanzapine 2007 FCA 359 [41].

Fothergill J considered that the law is “not entirely settled” [50]. He accepted that comity and stare decisis do not necessarily apply with full force between an NOC proceeding and a subsequent action [50]. He also noted that claim construction is formally a matter of law, but a peculiar one, which is heavily fact dependent [52]. In the end, he concluded that:

[53] To the extent that this Court may have discretion to follow or depart from the previous construction adopted in the NOC proceedings, I consider the Federal Court of Appeal’s prior construction to be prima facie binding, but acknowledge that it may be revisited if warranted by the evidence. In other words, I will adhere to the construction given to the ‘426 patent by Justice Hughes and by the Federal Court of Appeal unless a party provides good reason not to. The same holds true when defining the “inventive concept” of the patent and determining the “promise” of the patent, both of which are aspects of claim construction and are therefore questions of law

Is it possible to reconcile these divergent views on the effect of prior NOC decisions? The question of whether a court in an infringement action should follow a prior NOC proceeding on claim construction is one aspect of the broader question of when one court should follow the decision of a prior court. The answer turns on the interaction of (at least) three factors, namely the nature of the court, the nature of the issue and the nature of the proceeding. The authority of a higher court is more persuasive on a question of law than the authority of a lower court; holdings on questions of law are more persuasive than findings of fact; and actions are more persuasive than NOC proceedings. All three general principles are sound in their own right. It is the interaction between these principles which leads to complexity. This suggests a kind of three dimensional matrix for determining the persuasive effect of one decision over a subsequent decision, with some clear cases at the extremes. Classical stare decisis applies when all three factors point in the same direction: a holding on a matter of law by a higher court in an action is the most persuasive possible combination, and it is strictly binding on a lower court (whether in an action or an NOC proceeding). At the other extreme, a finding of fact by a lower court in an NOC proceeding has no persuasive weight on another lower court in an infringement proceeding.

Cases in which the principles point in different directions are more difficult. This case raised the persuasive effect of a higher court holding on a matter of law in an NOC proceeding on a subsequent lower court in an action. Should it be binding, as being a holding of law by a higher court, or not binding because it was an NOC proceeding? One approach would be to resolve such questions on a binary basis: we would consider the three principles, and decide that the holding is either strictly binding or not. But the approach taken by Fothergill J is to a apply a middle standard to a middle case. Two out of three factors point to it being binding, so it is very persuasive, but not strictly binding. This is broadly consistent with cases such as Allergan, in which the FCA addressed the issue of the persuasive effect of a holding of law on the same level of court between two NOC proceedings. Allergan is different from this case in some ways. While both involve a matter of law (suggesting more persuasive value), Allergan concerns a prior decision the same level of court, while the YAZ action involves a prior decision by a higher court, suggesting relatively more persuasive value in this case. On other hand, Allergan concerned two NOC proceedings, while this case concerns a prior NOC proceeding over an action, suggesting relatively less persuasive value of the prior decision over the YAZ action. The decisions are consistent in two respects. First, both are cases in which the principles point in different directions, and both adopt a middle standard for persuasive effect, rather than using a binary approach. Further, in both cases two of the three factors pointed towards a more persuasive effect, albeit not the same two, and the court adopted a very similar standard for persuasiveness. In principle, it might be possible to have a range of standards of persuasiveness depending on the particular combination of factors at issue, though that would make the law very complex, likely without much benefit. It would be interesting to run go through the cases to see what degree of deference is given in the various scenarios. There are at least three different standards of persuasiveness – are there more? Do all middle ground cases adopt an middle ground of persuasiveness? At the end of the day, perhaps I am making things too complicated, and it will turn out that comity and stare decisis can all be reduced to just a couple of simple rules. 

If that is not complicated enough, there are a couple of other important complications. First, the conceptual matrix just discussed makes the simplifying assumption that matters of law and matters of fact are distinct categories. Claim construction blurs that line. While claim construction is in principle a matter of law, it is heavily dependent on expert evidence, as Fotherfill J pointed out [45]. In its very recent decision in Nova v Dow 2016 FCA 216 (here), we saw the FCA acknowledge this by setting a standard of review for claim construction which is more deferential that for a pure question of law, but less deferential than for a matter of fact. This suggests that prior holdings on claim construction may be less persuasive then holdings of law, but more persuasive than pure questions of fact. This point, in addition to the fact that the prior decision in this case was only an NOC proceeding, clearly influenced Fothergill J to adopt a middle ground standard for persuasiveness.

Another difficulty is that, as noted above, it has been held that even holdings of law in NOC decisions are not strictly binding in subsequent actions. On the other hand, Sanofi 2008 SCC 61 was an NOC case, as was Viagra 2012 SCC 60, and it has never been suggested that for that reason the lower courts are free to depart from its holdings of law on selection patents and anticipation. I suggest that part of the solution to this conundrum is to recognize that stare decisis itself is not a binary concept of binding / not binding. As the SCC pointed out in R v Henry, 2005 SCC 76, [57]:

All obiter do not have, and are not intended to have, the same weight. The weight decreases as one moves from the dispositive ratio decidendi to a wider circle of analysis which is obviously intended for guidance and which should be accepted as authoritative. Beyond that, there will be commentary, examples or exposition that are intended to be helpful and may be found to be persuasive, but are certainly not “binding” in the sense the Sellars principle in its most exaggerated form would have it.

Thus, even if we accept that holdings of law in an NOC case are strictly obiter, so far as a subsequent action is concerned, obiter dicta may be so highly persuasive as to be almost indistinguishable from the ratio. Outside the NOC context, a fully reasoned statement of law by the SCC on a point that was fully argued by the parties will be effectively binding on lower courts even if it was strictly obiter dicta. By the same token, a fully reasoned statement of law by the SCC in a NOC proceeding will be effectively binding on lower courts.

This view is not inconsistent with Lilly v Novopharm / nizatidine [1998] 2 SCR 129 [95]-[96]. In the cited passages of Nizatidine the SCC merely declined to grant declaratory relief in light of the fact that it was an NOC proceedings. This is quite different from saying that if it had chosen to grant declaratory relief, any statement of law it might have made would not be binding on lower courts. The FCA cases cited by SCC in Nizatidine hold that NOC proceedings to not constitute an in rem declaration regarding invalidity. Again, this does not mean that statements of law made by the FCA in an NOC proceeding are not persuasive, or even binding when fully reasoned.

Admittedly, the FCA in Lilly v Novopharm /olanzapine 2007 FCA 359 did say that “it is inappropriate to rely on NOC proceedings to set binding precedent on controversial and uncertain questions in patent law” [41]. This cannot be reconciled with the fact that NOC cases such as Sanofi and Viagra, as well as many other NOC cases at the FCA level, are in practice routinely taken to establish binding law that is applicable in subsequent cases. The statement in Olanzapine simply does not reflect the law in practice. However, the view that NOC cases can set binding precedent is easily reconciled with Olanzapine on its facts. The actual holding was that the FCA declined to hear a moot appeal because of the nature of the proceeding. This is different from saying that if it had exercised its discretion to hear the moot appeal, any statements of law it might have made would not be binding.