Standard of Review for Attributes of POSITA

AFD Petroleum Ltd v Frac Shack Inc 2018 FCA 140 Gleason JA: Webb, Laskin JJA rev’g 2017 FC 104, 2017 FC 274 Manson J

2,693,567 / Fuel Delivery System and Method

At trial in Frac Shack v AFD, Manson J held several claims of Frac Shack’s 567 patent to be valid and infringed. On appeal, the FCA has reversed in part, holding that Manson J made a palpable and overriding error in his definition of the POSITA [41]. The invention relates to a system for refueling fracking equipment while the engines are running (see here for a summary), and Manson J had initially described the POSITA as having experience designing fueling equipment for fracking systems, but had omitted this aspect of the POSITA’s from his explicit findings: [42] (contrasting FC [142] with FC [144], [154]). This was important to the subsequent analysis of obviousness, because a novel fuel delivery system might be obvious to a person with expertise in designing fracking fueling equipment, but not to a party without such expertise [43]. In light of the error, the FCA remanded obviousness and related questions to Manson J for redetermination [46]. I’m not sure much will change, as one of the Frac Shack’s experts, whose evidence was largely accepted by Manson J [FC 245], did have expertise in designing fueling equipment for fracking systems [FC 64], and the expert for AFD, whose evidence was less persuasive, did not [FC 247].

Of more general interest is the FCA’s summary of the standard of review. The FCA held that “the impugned findings in the instant case regarding the attributes of the POSITA and the extent of the POSITA’s common general knowledge are matters of fact or mixed fact and law from which a legal issue cannot be extricated” [38] and therefore subject to review only for palpable and overriding error (some citations omitted):

[39] In Mylan Pharmaceuticals ULC v. AstraZeneca Canada Inc., 2012 FCA 109, 432 N.R. 292, this Court noted that issues of construction are matters of law and therefore reviewable for correctness. However, the Court went on to note at paragraph 20 that:

[…] any assessment of the evidence (concerning the state of scientific knowledge at the relevant time, or how a reasonable POSITA would understand the patent, for example) made by the Judge in the course of reaching his conclusion on the construction of the patent is reviewable for palpable and overriding error.

[40] Similarly, in Wenzel Downhole Tools Ltd. v. National-Oilwell Canada Ltd., 2012 FCA 333, 443 N.R. 173, this Court stated at paragraph 44 that the “weight to be given to the expert evidence as to how particular words would be understood by the POSITA is a question where the trier of facts is entitled to deference.”

“Make, Construct and Use” in Settlement Does Not Include “Sell”

Betser-Zilevitch v Nexen Inc 2018 FC 735 Brown J
            2,584,627 

This case is on the margins of what I normally blog about: the issue is whether a settlement agreement had been reached between the patentee Betser-Zilevitch, and the defendants, Nexen. The leading case on whether a settlement agreement has been reached is Apotex Inc v Allergan Inc 2016 FCA 155 Stratas JA; Trudel, Nadon JJA rev’g 2015 FC 367 Hughes J (which I did not blog about at the time). Here are a couple of the passages from Apotex Inc v Allergan Inc (citations omitted):

[32] The court is to view the specific facts of the case objectively in light of the practical circumstances of the case and ask whether the parties intended to be legally bound by what was already agreed or, in other words, whether an “honest, sensible business[person] when objectively considering the parties’ conduct would reasonably conclude that the parties intended to be bound or not” by the agreed-to terms. Put another way, looking not through the eyes of lawyers, but through the eyes of reasonable businesspeople stepping into the parties’ shoes, was there something essential left to be worked out? Another way of putting it is to ask how “a reasonable [person], versed in the business, would have understood the exchanges between the parties”.

[33] When courts find that there has been an agreement on essential terms, they will often imply non-essential terms into the agreement. The lack of agreement on non-essential terms will not stand in the way of a finding of an agreement. Put another way, “it is not necessary that the original contract include all the ancillary terms that are already implicit in its content”. “Even if certain terms of economic or other significance to the parties have not been finalized, an objective appraisal of their words and conduct may lead to the conclusion that they did not intend agreement of such terms to be a pre-condition to a concluded and legally binding agreement”. For example, assuming an agreement on essential terms is otherwise in place, courts can imply terms concerning the granting of a release, the manner of payment and the timing of payment. Often these will be “mere formalities or routine language.”

In this case, Betser-Zilevitch had made a offer by letter dated January 25, 2017 [22], and Nexen replied that it “is prepared to agree in principle” to those terms  (all through counsel) [24]. Betser-Zilevitch’s counsel then wrote to the Court, with Nexen’s consent, stating that “We advise that a settlement has been reached, subject to formalization, review and execution by the parties of a formal settlement agreement” [26].

Further exchanges ensued as draft agreements were exchanged, with the parties objecting to various details. Ultimately Betser-Zilevitch advised that “there was no agreement regarding settlement, that all prior settlement offers were withdrawn, and that all offers made by the Defendants were refused” [11]. The Defendants filed a motion seeking a declaration that a settlement had been reached.

Brown J granted the motion. The letter to the Court, in particular, was “convincing evidence” of the intent of the parties to create legal relations, as it was “unequivocal” in stating that a binding settlement had been reached [35]. The reference in the acceptance to an agreement “in principle” did not affect this conclusion, as that phrase must be understood contextually [31].

It was then left for Brown J to resolve the disputed terms, which he did largely by holding the parties to the terms in the offer in the letter of January 25, 2017. He found that most of the contested points were efforts by one party or the other to use the drafting process to vary the terms that had already been agreed upon.

The point of most general interest is that the offer letter specified that “Mr. Betser will agree to provide Nexen an up-front, fully paid up license to make, construct and use the invention” [22, emphasis added]. Nexen proposed that the formal agreement include the right to “sell” in addition [60]. Brown J disagreed, holding that the right to sell was not an essential term, and should not be implied:

[63] The parties were represented by counsel. They would or should have known that section 42 of the Patent Act identifies four key rights afforded to patent holders like Betser-Zilevitch. The four rights granted by section 42 may be granted or withheld as the patent holder wishes; they are property of the patent holder. Nexen accepted a settlement agreement that did not contain the Right to Sell.

Not Necessary to Decide Whether the Patent at Issue Is a Selection Patent

Apotex Inc v Shire LLC 2018 FC 637 Fothergill J
            2,527,646 / lisdexamfetamine [LDX] / VYVANSE / NOC

Shire’s invention at issue in this consolidated impeachment action and prohibition application [20] relates to the compound L-lysine-d-amphetamine aka lisdexamfetamine aka LDX, its pharmaceutical compositions and its use for treating ADHD [34]-[40]. Fothergill J found the 646 patent to be valid and not infringed by Apotex’s activities to date, on the basis of the defence of experimental or regulatory use, but he granted the order of prohibition on the basis that the patent would be infringed if Apotex were to obtain an NOC and market Apo-lisdexamfetamine. The decision raises some interesting issues relating to selection patents and obviousness, though they were not dispositive, and in the end the decision turned largely on the facts.

Amphetamines have long been used to treat ADHD, but they can be abused by snorting or injection [28]. There was therefore a need for a therapeutically effective abuse-resistant dosage form of amphetamine. LDX provides a solution to that problem in the form of a prodrug, namely an amphetamine covalently attached to a chemical moiety which is transformed into the active amphetamine in the body through a time-dependent process of hydrolysis, resulting in an extended release form that cannot be effectively circumvented by snorting or injection [31]. The claims as construed by Fothergill J were directly specifically to a conjugate of the amino acid L-lysine bound to d-amphetamine [74].

The main validity attack was based on AU Patent No 54168/65, which disclosed “a very large class of d-, l-, and dl-amphetamine amino acid conjugates, both protected and unprotected” [104]. None of the specific examples disclosed LDX itself [105]. The parties debated whether the 646 patent was a selection over the 168 patent [88], with Apotex arguing in particular that the 646 patent provided “insufficient description of its advantages over the purported genus patent to be classified as a selection from AU 168, citing Hoffman-La Roche Ltd v Apotex Inc, 2013 FC 718.” I am very pleased that Fothergill J cited my blog post “Time to Abandon the Doctrine of Selection Patents?” which critiqued that aspect of Hoffman-La Roche, saying that those criticisms “may be reason to approach Hoffman-La Roche with caution” [96]. (I’d point out that my post Genus Anticipates Species is perhaps even more directly relevant to the anticipation analysis in Hoffman-La Roche, as that is the post in which I argued that Hoffman-La Roche cannot be distinguished from Sanofi 2008 SCC 61.)

More importantly, in the post cited by Fothergill J, I had argued that the selection patent doctrine was arguably generating more heat than light, and it might be time to abandon the doctrine entirely. Fothergill J stated that “Professor Siebrasse’s general remarks regarding this potentially confusing area of patent law are worth bearing in mind,” and he went on to emphasize that

[97] By statute, the basis for assessing anticipation cannot depend on whether the patent is a selection patent or not. The jurisprudence does not imply that anticipation and obviousness in respect of a selection patent are to be assessed over the genus patent from which it is a selection, rather than over the prior art read as a whole. A selection patent “does not in its nature differ from any other patent” (Sanofi-Synthelabo at para 9), there is no reference to selection patents in the Patent Act, and the conditions for a valid selection patent do not constitute an independent basis upon which to attack the validity of a patent. A selection patent, like any other patent, is therefore vulnerable to any attack set out in the Patent Act, but no other.

This is a strong statement, though in the end he held that nothing turned on the point, so it was unnecessary for him to decide whether the 646 patent was a selection patent [98].

On the facts, Fothergill J concluded that the AU 168 patent did not anticipate the 646 patent, in part because the AU 168 patent did not disclose the mechanism or relevant properties of the prodrug, or even that it was a prodrug [106]-[108]. This reasoning is consistent with and tracks the analysis in Sanofi 2008 SCC 61 [38], [40]-[41], which emphasized disclosure of the special properties of the species. I would suggest that there is another route to the same end, which is that the genus does not anticipate the species unless the genus contains an individualised description of the species. That is the European position: see Dr Reddy’s [2009] EWCA Civ 1362 [23]-[33]. In my view, that is entirely consistent with established Canadian principles: a disclosure of genus which does not individually identify a species would not allow a skilled person to arrive at the species “in every case and without possibility of error” (Beloit 8 CPR(3d) 289, 297 (FCA)), nor would practising the genus necessarily result in infringement of the species patent. A person who has disclosed a genus and “planted his flag” by disclosing some representative species, does not plant a flag at every species within the genus: to plant a flag in L'Anse aux Meadows is to plant a flag in North America, but it is not the same as planting a flag in San Diego. I’d suggest the converse is also true. If the genus patent had individually disclosed a compound, that compound could not be the subject of a new claim as such, even if it’s unique properties were not disclosed, for the same reason that a party who discovered a new use for a known compound can claim the new use, but not the compound per se. But all that is an aside, given that in this case the claimed species was not individually disclosed.

Turning to obviousness, Fothergill J noted that the FCA in Ciba v SNF 2017 FCA 225 (blogged here) had raised questions as to the role of the “inventive concept” in the obviousness analysis [115]. Apotex went so far as to argue that “following Ciba, ‘inventive concept’ should no longer be used in the obviousness analysis, pending clarification of its meaning by the Supreme Court. Rather, the question of obviousness should be determined by reference to the claims alone” [116]. Fothergill J rejected this, noting that as a matter of stare decisis, Ciba cannot be understood to have overruled the SCC decision in Sanofi [117]. Moreover, as Fothergill J noted, in this particular case, “the inventive concept may be grasped without difficulty, and there is no danger of distraction or engaging in unnecessary satellite debate” [117]. While the FCA in Ciba v SNF was certainly very critical of the role that is sometimes played by the inventive concept, Fothergill J’s approach nonetheless strikes me as being consistent with both Ciba v SNF and Sanofi. Ciba v SNF counseled particularly strongly against the uncertainty which might arise from parsing the disclosure in a search for the inventive concept [74], but the Court did not say that the “inventive concept” should never be used. 

This does not detract from the criticisms of the role of the "inventive concept" raised by the Court in Ciba; it is only to say that they did not arise in this particular case. I have thought for some time that the European problem-solution approach may be a way of resolving some of those problems, and that it is consistent with the traditional Canadian approach to obviousness. Consequently, I found it particularly interesting to see Shire suggesting a European-style “problem-solution” analysis might be “viable” and consistent with Sanofi [120]. The Court of Appeal in Ciba suggested that it will be up to the SCC to develop “a workable definition of the inventive concept” [77]. But given that the SCC in Sanofi did not provide a workable definition, perhaps it is open to the Federal Courts to fill that gap, so long as it is done in a manner that is consistent with Sanofi and prior Canadian law.

Finally, on a minor point of interest, the claim construction adopted by Fothergill J implied that some claims were redundant, describing exactly the same compound either verbally or visually. Fothergill J noted that “[a]s a general rule, claims should be construed to avoid redundancy. However, claims may be repeated, and courts may even read claims as redundant when it is reasonable to do so,” and in this case he held that the best reading was to accept the redundancy [75]. It seems likely that the reason for the redundancy was an excess of caution—the drafter was likely worried that either the verbal or visual representation might be misconstrued, and so included both.

Arctic Cat v BRP Ignition Timing Decision Affirmed

Arctic Cat Inc v Bombardier Recreational Products Inc 2018 FCA 125 Gauthier, De Montigny, Gleason JJA aff’g 2016 FC 1047 Roy J
            2,322,738

At trial in Arctic Cat v BRP Roy J held that on a proper construction of the claims, Arctic Cat’s 738 patent relating to engine ignition timing was not infringed by BRP’s snowmobile engines, but if he was wrong as to the proper claim construction, so that BRP’s engines did infringe, then the claims at issue were invalid for obviousness: see previous posts on claim construction and damages. Arctic Cat appealed, and the FCA has now affirmed on the basis of obviousness, in a brief decision delivered from the bench.