Expediency of One Action Is Exclusive Purpose of Joinder Rules under PM(NOC) Regulations

Teva Canada Limited v Bayer et al 2020 FCA 86 Nadon JA: Pelletier, de Montigny JJA rev’g 2019 FC 1039 Pentney J

2,547,113 / 2,624,310 / 2,823,159 / 2,396,561/ rivaroxaban /XARELTO

This appeal clarifies several important procedural points under the new the PM(NOC) Regulations. In the main part of the decision, the FCA greatly clarified the meaning and implications of s 6.02, which provides that no action may be “joined” to a s 6(1) action during the period of the statutory stay. Two other points arose tangentially. The FCA also noted that procedural precedent under the former Regulations is not necessarily applicable under the new Regulations, given the change in purpose; and Nadon JA remarked that that disposing of cases brought under the Regulations within 24 months “remains a goal—not an obligation on the Court” [132].

This appeal concerns a motion to add defendants in a trial of common issues under the PM(NOC) Regulations. The issue of joining actions is important both for the usual procedural concerns of fairness and efficiency of adjudication, and also because it raises the issue of whether the first generic to serve an NOA can get a practical first-mover advantage over later generics. Under the US Hatch-Waxman patent linkage system, the first applicant to challenge a drug patent is entitled to 180 days of exclusivity against subsequent generic applicants (21 U.S.C. § 355(j)(5)), with the idea that this provides an incentive for the first generic to bear the cost of litigation. There is no equivalent statutory exclusivity period in the NOC Regulations, but the first generic to get its NOC will nonetheless get a practical head start.

In the underlying motion, Teva and Apotex resisted a motion to add Taro and Sandoz as additional defendants in the PM(NOC) action brought by Bayer against all four. Teva and Apotex argued, in part, that adding Taro and Sandoz would deprive Teva and Apotex of the potential first-mover advantage. As discussed here, in the decision under appeal Pentney J rejected this argument, and then went on to order Taro and Sandoz to be added, in light of a balancing of the usual considerations of balancing judicial economy against potential prejudice to the parties. While Pentney J did not provide the specific basis for his order, the FCA held that Rule 105 does give the discretion to make an order of that type [41].

The FCA also affirmed that the potential loss of the first-mover advantage should not be considered. While the procedural requirements under the PM(NOC) Regulations may result in a practical first-mover advantage, there is nothing in the Reuglations or the RIAS to suggest that this is the purpose: [53-54]. Indeed, the contrast with the US example where a first-mover advantage is explicitly provided for suggests that no such purpose was contemplated in the Canadian patent linkage system: [55].

The FCA nonetheless reversed. While Rule 105 permits an such an order to be made, it does not grant an unfettered discretion. In particular, the exercise of the discretion must not fall afoul of s 6.02 of the Regulations, which provides that no action may be “joined” to an action commenced under s 6(1) during the period of the statutory stay [81].

The FCA held that “joined” is not merely synonymous with “consolidated” [110]. This conclusion turned in part on the textual meaning of the two terms [99]-[121], where Nadon JA concluded that the words do not suggest that the meaning of “joining actions” is confined to consolidation: “Rather, they suggest that actions are joined whenever they are brought together, connected or brought into close association” [114].

The FCA’s conclusion turned primarily on the purpose of the Regulations. Nadon JA drew a very strong contrast between the purpose of s 6.02 and Rule 105:

[122] Having analyzed the wording of section 6.02 of the Regulations, I now turn to consider more closely the purpose of the prohibition. The entire raison d’être of the section 6.02 prohibition is to promote the expediency of one action, and one action only, instituted pursuant to subsection 6(1), in the context of the 24-month time period within which that action is meant to be determined. My meaning in saying that the prohibition is concerned with the expediency of one action only becomes clear when the purpose of the prohibition is contrasted with the purpose of Rule 105(a). The various forms of relief available under Rule 105(a) seek to promote the most expedient and least expensive determination of multiple proceedings before the Court that share similar issues. In other words, in making an order under Rule 105, a judge or a prothonotary seeks to achieve the most efficient and inexpensive way of dealing with two or more proceedings, both in the interest of the parties and of the Court. Not so with section 6.02 of the Regulations. Section 6.02 is exclusively concerned with the progress of a single action to ensure it is determined within the 24-month deadline that applies to it. The concerns that animate an order under Rule 105(a)—efficiencies and cost savings across multiple parties in multiple proceedings, and as they apply to the court—have no bearing on section 6.02 of the Regulations, the singular focus of which remains exclusively on determining that single action before its peculiar deadline. Thus, to make an order under Rule 105 for the arrangement of multiple proceedings that would result in time and cost savings for multiple parties and the court would still be contrary to the purpose of the section 6.02 prohibition if that arrangement made it at all less likely that any single action brought pursuant to subsection 6(1) would be determined within its 24-month deadline.

Further, the concern under s 6.02 “is whether the Rule 105 order could possibly result in the appellants’ actions exceeding their 24-month deadlines” [124] (emphasis added).
Nadon JA did not undertake a deep inquiry into exactly what would or would not be considered “joining” as the Court was satisfied that the practical effect of the order at issue was tantamount to a consolidation: [129], [131]. In coming to this conclusion, the FCA observed that while the discoveries that had taken place prior to the appeal were nominally conducted by all parties upon consent, the appellants were not “truly free to arrange their proceedings as they saw fit”: “I doubt very much that the Federal Court would have appreciated being advised by the appellants that they refused to cooperate with Taro and Sandoz in regard to the examinations on discovery or in regard to any motion arising from the common issues” [128].

Two other points deserve mention. Nadon JA noted that procedural precedent under the former Regulations would not necessarily be applicable under the new Regulations:

 [77] [I]t is not a foregone conclusion that the principles set out in Sanofi-Aventis [relating to abuse of process], which dealt with the former Regulations, will find identical application under the current Regulations, as the purpose of proceedings commenced under subsection 6(1) of the current Regulations differs from the purpose of proceedings commenced under the former Regulations.

Finally, Nadon JA also noted the 24-month period contemplated for the resolution of actions brought under the Regulations is a goal, not an obligation on the Court:

do not require the Federal Court to render judgment within 24 months. . . . Consequently, it is my view that, in case-managing these cases, judges should bear in mind that they are not positively duty-bound to decide them within the 24-month period. I wish to be clear that I am not suggesting that the 24-month guideline be dealt with flippantly. However, it should be recognized that disposing of cases within 24 months remains a goal—not an obligation on the Court. It bears recalling that even if, in a given case, judgment is rendered by the Federal Court in the 24-month period, appeals taken from such a judgment do not extend the stay period.

No Specific Prerequisites Before Having Recourse to Prosecution History in Claim Construction

Bauer Hockey Ltd. v. Sport Maska Inc. (CCM Hockey) 2020 FC 624 Grammond J

2,214,748

In this decision, Grammond J held that no valid claims of Bauer’s 748 patent were infringed. The decision turned largely on claim construction and Grammond J noted that if the parties had brought a motion for summary judgment or summary trial “a considerable amount of judicial resources would have been saved, and each party’s legal costs would have been substantially reduced” [29]. This indicates that Manson J is not alone among FC judges in seeing the need for increased use of summary proceedings: see Viiv Healthcare 2020 FC 486 (here) and Canmar 2019 FC 1233 (here). One noteworthy point is Grammond J’s holding that there are no specific requirements that must be triggered before reference to the prosecution history is permissible under s 53.1 [65].

The invention at issue relates to hockey skates. The uppers were traditionally made with two “quarters” that were sewn together. The 748 patent essentially claimed a one-piece quarter. It may seem obvious that the two pieces should be joined together, and this is exactly what Grammond J held [154-58] [184]. Grammond J addressed the “Beloit question” – 'If it was so easy, why was it not done before?' (my paraphrase of Beloit (1986), 8 CPR (3d) 289 (FCA) at 295, quoted at [146]), by noting that it had not been done before because of cost considerations and not because it was not technically feasible [162-65]. Bauer tried to rebut the prima facie obviousness case with arguments based on commercial success, but Grammond J rejected these, explaining that an adequate causal nexus between the commercial success and the invention specified by the claims had not been established [171-79].

On claim construction there has been an on-going debate as to whether recourse to the disclosure is always permissible, or is permissible only if the claim terms are ambiguous. Grammond J came down very firmly in favour of the former position:

[49] Legal interpretation is not an obscure practice governed by arcane rules. It is, as Lord Hoffmann once famously said, not very different from “the common sense principles by which any serious utterance would be interpreted in ordinary life.”

[55] The modern method [of interpretation] aims at helping the interpreter find clues about the meaning of a legal writing. There is no hierarchy of these clues, nor any predetermined order in which they are considered. In particular, the modern method rejects what is known as the “plain meaning rule,” or the idea that if one category of clues – the text – provides a “clear” answer, the other categories of clues are to be disregarded.

He noted that “Most recent decisions of the Federal Court of Appeal are in line with this approach,” [57], quoting Tetra Tech 2019 FCA 203 [86] and Tearlab 2019 FCA 179 [33] saying that “[c]laim construction requires that the disclosure and the claims be looked at as a whole.” I am entirely in agreement with Grammond J’s observations in this regard.

Without detracting from this general approach, Grammond J noted that patents have “certain distinctive characteristics” that need to be taken into account [51]. One in particular is reference to the prosecution history under s 53.1 which provides that communications between the patentee and the Patent Office “may be admitted into evidence to rebut any representation made by the patentee in the action or proceeding as to the construction of a claim in the patent.” In the specific of the modern approach to interpretation, Grammond J held that there are no specific requirements that must be triggered before reference to the prosecution history is permissible (emphasis added):

[65] Although the use of prosecution history is described in terms of estoppel in the United States, section 53.1 squarely makes this a matter of claims construction. When an issue of claims construction arises, the patentee is always making representations to the Court as to the proper construction of the claims and the defendant is always attempting to rebut those representations. Therefore, in my view, as long as the issue is one of claims construction, section 53.1 applies and the prosecution history is admissible. In other words, there is no need to identify a particular representation and rebuttal every time a reference is made to the prosecution history. It is simply integrated in the interpretive process.

Grammond J did have recourse to the prosecution history, but it served only to confirm the interpretation that was plain from the patent itself. This is not very surprising; the examiner made an obviousness objection, the applicant amended the claims to overcome it, and in litigation the patentee sought to reclaim the lost ground [103-06]. This illustrates why recourse to the prosecution history is often likely to be redundant: when the examiner accepts an amendment intended to restrict the scope of the claims, it will not be very surprising that the new language does indeed restrict the scope of the claims.

Direct Infringement of Product "For Use" Claim; No Inducement of Corresponding Use Claim

Janssen Inc v Teva Canada Ltd 2020 FC 593 Manson J
             2,655,335 / paliperidone palmitate / INVEGA SUSTENNA

Last Friday’s post gave an overview of this decision. As noted, the 335 patent relates to dosing regimens for long acting injectable paliperidone palmitate formulations for treatment of schizophrenia. The 335 patent has three sets of claims: product claims (to prefilled syringes adapted for administration according to the claimed dosing regimen; use claims (“use of a dosage form” etc); and Swiss claims (“use. . . for the manufacture of a medicament”). Yesterday’s post discussed induced infringement of the use claims. This post considers the direct infringement of the product and Swiss claims.

In respect of the product claims — the prefilled syringes — Teva argued that it could not directly infringe because they all require administration in accordance with the claimed dosing regimens; and alternatively, Teva submitted even if administration to patients was not required, Teva did not direct use in accordance with the claimed dosing regimens [234].

Manson J rejected these arguments after reviewing all the essential elements of product claim and finding they were all incorporated in Teva’s proposed product [252]. Claim 1 is to “Prefilled syringes containing a depot formulation of paliperidone . . . for administration by intramuscular injection to a psychiatric patient in need of treatment for schizophrenia.” As I see it, the key issue was the meaning of “for”. Teva’s argument seems to turn on the view that this means that the syringe had to actually be used for the specified purpose for the claim to be infringed. Manson J noted that the product was “capable, approved and intended” for the specified purpose, and that was enough to bring it within the claim. That makes sense as a matter ordinary grammar: I am boiling water “for tea” if I intend to use the water for tea, even if I get distracted and never actually make myself a cup of tea. The intended use was discerned primarily from Teva’s PM. I note that this approach to a claim “for” a purpose is essentially the same as that adopted by Lord Briggs (Lord Hodge concurring) and Arnold J (as he then was) in Warner-Lambert [2018] UKSC 56 var’g [2016] EWCA Civ 1006 var’g [2015] EWHC 2548 (Pat) Arnold J: see here.

Here is a key point (my emphasis):

[253] The Teva PM teaches that the prefilled syringes to be sold by Teva can be administered in combination according to the claimed dosing regimen. While this information may not rise to the level of “instructions to infringe” sufficient to induce practitioners to prescribe and use the syringes according to the claimed dosing regimen, it is sufficient to establish direct infringement of the product claims.

That is, claims to a product for a use are different from the corresponding use claims because the PM may establish intent to influence physicians to use the product in the specified manner, even if the PM does not in fact cause the physicians to use the product in the specified manner; the former is all that is necessary to establish direct infringement of a claim to a product “for” a specified purpose, while the latter is necessary to establish induced infringement of a use claim.

Turning to the Swiss-form claims, it is well known that Swiss claims were first developed as an end-run around the prohibition in European law on patenting methods of medical treatment. In form, they are a claim to a product, though they are intended to protect a use. As a result, in Novartis 2013 FC 985 Hughes J held that the court “should disregard the artificial nature of a Swiss claim and look at what is the real subject matter of the claim” [101]. In effect, Hughes J held that a Swiss claim should be construed as a use claim, even though, on its face, it is a product claim. Consequently, Hughes J held the claims at issue to be unpatentable methods of medical treatment [101]. In this case, Manson J took a different approach. He held that Swiss claims should be construed on the same principle as any other claim, namely as it would be understood by a skilled person [161], and consequently “The Swiss-type claims are capable of infringement if the medicament is adapted for administration to a psychiatric patient in need of treatment, according to the claimed dosing regimen” [163]. Consequently, the Swiss claims of the patent were directly infringed for the same reason that the product claims were directly infringed [256]. Manson J’s approach strikes as preferable. To the extent that Swiss form claims are objectionable as being an end-run around the prohibition on patenting methods of medical treatment, this should be addressed in the substantive law of subject-matter eligibility, rather than through a distorted construction of the claim itself.

With that in mind, there are two other minor points worth noting.

First, Manson J reiterated the need for clarification of the prohibition on patenting methods of medical treatment, though he noted that nothing turned on it in this case [143].

Second, Manson J admitted evidence of the prosecution history to rebut Janssen’s proposed claim construction on a particular point [140-42]. However, this had no effect on the result, as the plain meaning of the claim language supported the same construction as the prosecution history [140]. In effect, the claim on its face said X, during prosecution Janssen asserted that it meant X, the patent examiner evidently accepted that it meant X, but at trial Janssen asserted that it meant Y. This illustrates why the use of prosecution history can add needless complexity to a case; in establishing that a claim does indeed mean what it says on its face, it is not particularly helpful to go back and show that during prosecution the patentee agreed that it meant what it says on its face.

Split in Inducement Case-law Recognized

Janssen Inc v Teva Canada Ltd 2020 FC 593 Manson J
             2,655,335 / paliperidone palmitate / INVEGA SUSTENNA

In this NOC action, Manson J held that Janssen’s 335 patent, relating to dosing regimens for long acting injectable paliperidone palmitate formulations for treatment of schizophrenia, was not invalid for obviousness. He also held certain product claims would be infringed by the sale of Teva’s paliperidone palmitate product, though Teva would neither infringe nor induce infringement of the parallel use claims. He accordingly enjoined the sale of Teva’s product until the expiry of the 335 patent. The obviousness analysis turned on the facts. The most interesting part of the decision is Manson J’s analysis of inducement. Manson J acknowledged the apparent split in the case law on the second step of the Corlac test, which I identified in my paper “Is 'But For' Causation Necessary to Establish Inducement?” (available on SSRN). I’m not entirely persuaded by Manson J’s explanation of the split, but recognizing its existence is certainly a step in the right direction. The practical take-away is that product claims are crucial to effective enforcement of a dosage regimen invention.

Schizophrenia is a debilitating and incurable disease [4]. Antipsychotic drugs are the cornerstone of treatment and management [8]. A leading cause of relapse is non-adherence, where patients do not take their antipsychotic medication as prescribed [11]. “One strategy to ensure treatment adherence is the use of long acting formulations of antipsychotics. One type of long acting formulation is intramuscular injections of antipsychotic drugs, known as ‘depot formulations’ or ‘long acting injectables’. Once injected, the drug releases from the injection site slowly, providing the patient with a prolonged dose of the drug” [12]. Paliperidone was known in the prior art to be a useful antipsychotic, and it was available as an extended release tablet for oral administration [121]. The invention at issue relates to a dosage regimen for a depot formulation of paliperidone palmitate [15]. Specifically, the regimen consists of a first loading dose of 150 mg-eq of paliperidone palmitate administered into the deltoid muscle on day 1; a second loading dose of 100 mg-eq of paliperidone palmitate administered into the deltoid on day 8 + 2 days; and subsequent maintenance doses of 75 mg-eq of paliperidone palmitate administered into the deltoid or gluteal muscle monthly + 7 days after the second injection [19].

As paliperidone palmitate was a known antipsychotic and the use of long-acting depot formulations was also known, the validity of all the claims turned on the inventiveness of the dosing regimen itself [174]. Obviousness turned on a fairly straightforward application of the obvious-to-try analysis [198]. Manson J noted in particular that in order to design the regimen, it would be necessary to first determine the pharmacokinetic profile of paliperidone depot formulation, which was not disclosed in the prior art [201], [203], [208], and that in order to arrive at the appropriate regimen the POSITA would have had to carry out prolonged and arduous experimentation in the form of clinical trials to evaluate the safety and efficacy of a large number of variables including fixed doses, variable doses, and injection sites [203], [218]. Consequently, he held that the dosage regimen was inventive and the asserted claims were therefore not obvious [224].

Turning to infringement, the 335 patent has three sets of claims. Claims 1 to 16 are to prefilled syringes adapted for administration according to the claimed dosing regimen (“product” claims); claims 17 to 32 mirror the first sixteen claims, except that they are directed towards “use of a dosage form of paliperidone as paliperidone palmitate” rather than prefilled syringes [148] (“use” claims); and the final set of claims are the “use of paliperidone as paliperidone palmitate for the preparation [or manufacture] of a medicament” (Swiss-type claims).

The parties agreed that Teva would not directly infringe the “use” claims [153], [235], and infringement of those claims therefore turned on inducement. In my paper on Is 'But For' Causation Necessary to Establish Inducement? (available on SSRN), I noted that while the test for inducement set out in Corlac 2011 FCA 228 [162] requires at its second stage that the influence of the indirect party be the “but for” cause of direct infringement, there are a number of other cases that endorse a less stringent test. For example, Abbott v Novopharm 2007 FCA 251 [26] inducement was found on the basis that the proposed product monograph would be “an encouragement to infringe.”

In his decision, Manson J expressly acknowledged the divergence between these lines of cases, [259-64]. I am pleased to see the Federal Court recognize explicitly that there is an apparent split in the cases, as confronting the issue directly will help clarify the law. However, I am not entirely persuaded by Manson J’s analysis of the divergence. In Manson J’s view, the split is between the “earlier cases” [264], and the “more recent cases” [262]. The earlier cases only required “some nexus” to the generic company (the cases reviewed by Manson J were all NOC cases) [261], while “in more recent cases,” the Court has “scrupulously” applied the Corlac test, “with particular focus on the second prong” [262]. Manson J stated expressly that “The ‘but for’ influence required in the second prong of the Corlac test requires a higher threshold for establishing inducement than was applied in the earlier cases” [264].

Thus, if I understand correctly, Manson J is of the view that the law has changed, presumably in light of Corlac; or alternatively, the law has not changed, but since Corlac the courts have become more careful in applying what was always existing law. So, he says that in the earlier cases “the second and third prongs of the inducement test, influence by the generic on the infringing party and knowledge that this influence will result in infringement, appear not to have been fully considered” [261]. I have great difficulty with the view that the law has changed; as I discuss in my paper, Corlac cited a line of prior cases articulating the requirement in the same way, through Dableh [1996] 3 FC 751 (FCA) and Warner-Lambert (1988), 19 FTR 198, all the way back to Slater Steel (1968), 55 CPR 61 (Ex Ct).

I also have difficulty accepting the suggestion that the Court of Appeal in Abbott, for example, was simply careless in its application of the test, with the implication that the result would have been different had the Court been more careful. Manson J recognized that there was a line of cases that “are fairly consistent” than inducement can be established simply by making reference to the “new” infringing use, in cases involving a new use for a known compound ([259]), including three decisions by, or affirmed by, the FCA. One case might be carelessness, but a series of cases to the same effect is precedent.

My view, as discussed in my paper, is that the cases are consistent in the result, as the stringent “but for” nature of the second branch was not determinative in any decision except Slater Steel, while there are cases which apply the more relaxed standard, which would have gone the other way had a but for test been used. In my view, there is no split, but rather a single outlier, namely Slater Steel.

While Manson J clearly endorsed the application of a strict “but for” causation requirement at the second branch of the Corlac test, it is not clear to me whether his holding on this point was determinative. Whatever legal test is used, the facts are obviously crucial to the outcome of any particular case. As Manson J pointed out “[a]n important factor in all of these cases is the wording of the claims themselves” [266], along with the instructions in the product monograph, which is “a key document in the inducement analysis” [276]. Unfortunately, Manson J’s analysis of Teva’s product monograph is so heavily redacted that I cannot tell whether his application of a strict “but for” test was crucial to the outcome, or whether the inducement test failed primarily because the statements in the PM were too indirect, even on a more relaxed standard. My suspicion is that the “but for” element was crucial, but I really am not sure.

There is a related point that I found puzzling, probably because of the redactions. In arriving at his conclusion on inducement, Manson J emphasized evidence that physicians’ prescribing practices would be individualized based upon clinical symptoms and that psychiatric medical professionals are very familiar with using paliperidone palmitate in their practice [285-89]. Consequently, medical professionals would not “eschew good clinical practice in favour of a general recommendation in a PM” [286], and would instead “consider individual patient characteristics when prescribing and dispensing depot formulations of paliperidone palmitate rather than blindly following a number in a PM” [289]. For this reason he concluded that while some infringement would occur, “this infringement is the result of prescribing physicians’ skill and judgment applied to specific patient characteristics, rather than influence exercised by Teva via its PM” [290]. My puzzle with all of this is that Manson J had concluded that the dosage regimen was non-obvious and indeed was the result of a great deal of experimentation and research. If that is the case, it’s not clear to me why medical practitioners are not influenced by the PM, which apparently instructs use of the claimed regimen (again, this is not entirely clear because of the redactions). Is it that the claimed regimen, though inventive, is really not that good, and a skilled medical practitioner would have no difficulty coming up with something better on a case by case basis? In any event, I won’t speculate further. No doubt the point would be clear from the unredacted decision, or to someone with more familiarity with the facts.

No Opportunity to Appeal Means No Abuse of Process in Relitigating Previously Decided Issues

Amgen Inc v Pfizer Canada ULC 2020 FC 522 Southcott J
            1,341,537 / filgrastim / NEUPOGEN / NIVESTYM

My first post on this decision gave an overview of the facts and discussed the main substantive holding, namely that the invention was obvious. The decision also raised an issue of abuse of process, though one that should largely disappear with the new NOC actions.

Amgen had previously asserted the 537 patent against Apotex in proceedings under the old PM(NOC) Regulations, and lost before Hughes J who held the 537 patent invalid for obviousness: Amgen v Apotex 2015 FC 1261 [the Hughes Decision] (here) aff’d as moot 2016 FCA 196. Pfizer had earlier brought a motion seeking dismissal of Amgen’s on the basis of abuse of process. The motion was dismissed, 2018 FC 1078, but in affirming the decision dismissing the motion the FCA, 2019 FCA 249, stated that Pfizer was not precluded from raising the abuse of process doctrine at trial in connection with individual factual and legal findings in the Hughes Decision: see here. In this action, Pfizer accordingly argued that it would be an abuse of process for Amgen to re-litigate certain factual and legal issues that had been decided by Hughes J.

Southcott J exercised his discretion not to apply the abuse of process doctrine, primarily because Amgen had not had the opportunity to appeal the Hughes Decision [160]. Southcott J noted:

[164] In my view, it is unfair to hold Amgen to the results of the Apotex Decision in the current proceedings, when it did not have the benefit of substantive appellate review of that decision. As Amgen emphasizes, the Federal Court of Appeal in Amgen Canada dismissed Amgen’s appeal for mootness in part because it could pursue a subsequent infringement action (at para 22). In conclusion on this issue, regardless of the scope of Amgen’s burden to identify evidence warranting reconsideration of the issues before Justice Hughes,

This observation strikes me as compelling. Presumably such issues will largely disappear with the new NOC actions.

Appropriate and Inappropriate Use of Cease and Desist Letters

Fluid Energy Group Ltd v Exaltexx Inc 2020 FC 81 McHaffie J

2,892,876 / 2,961,777 / 2,961,787 / 2,961,792 / 2,961,794 / 2,961,783

In the action underlying this motion, Fluid brought an infringement action against Exaltexx, and then sent cease and desist letters directed at third parties doing business with Exaltexx. In this decision, McHaffie J granted an interlocutory injunction based on s 7(a) of the Trademarks Act, enjoining Fluid from sending such letters. Yesterday’s post provides an overview of the facts and discusses McHaffie J’s analysis of the “serious question” branch of the RJR-MacDonald [1994] 1 SCR 311 test for interlocutory injunctions, including his treatment of the substantive elements of s 7(1). This post deals with the remaining aspects of the interlocutory injunction analysis. The overarching message I take from McHaffie J’s decision is that cease and desist letters serving the “laudable purposes” of “providing notice of a legal claim and a potential lawsuit, allowing the recipient to assess the claim and their conduct, and initiating discussions leading to resolution of the dispute before litigation is commenced,” are appropriate and will not be enjoined; but letters intended to put pressure on a defendant to settle regardless of the merits are an abuse of the legal process and will not be permitted.

Interlocutory Injunctions and Cease and Desist Letters: Everything You Ever Wanted to Know

Fluid Energy Group Ltd v Exaltexx Inc 2020 FC 81 McHaffie J

2,892,876 / 2,961,777 / 2,961,787 / 2,961,792 / 2,961,794 / 2,961,783

McHaffie J’s decision in Fluid Energy Group v Exaltexx is a tour de force on an important issue, namely the availability of an interlocutory injunction based on s 7(a) of the Trademarks Act to enjoin cease and desist letters directed at third parties doing business with the defendant in an infringement action. The decision covers many issues, both procedural and substantive, that will be relevant to any situation involving threatening cease and desist letters. McHaffie J’s decision complements that of Manson J in Excalibre 2016 FC 1279 (aff’d on cross-appeal 2019 FCA 121, appeal dismissed for delay 2019 FCA 22), awarding damages under s 7(a) for letters threatening to bring infringement actions against end-users of the defendant’s product that was ultimately held to be non-infringing: see here, here and here. Both decisions are fully reasoned, and we now have a good body of recent law on the application of s 7(a) to cease and desist letters. The entire decision will be required reading on the issue, and as I have little to add to McHaffie J’s analysis, for the most part I will simply summarize the issues and highlight a few choice passages. This post will focus on the application of s 7(a) to cease and desist letters, and the next post will consider the interlocutory injunction issues.

Fluid and Exaltexx are competitors in the sale of “safe acids” to the oil and gas industry. These are strong acids that have been modified by blending them with additives to be more environmentally and dermatologically safe [8]. In the underlying action, the patentee, Fluid, asserts that Exaltexx infringes its patents relating to safe acids. After commencing the action, Fluid sent cease and desist letters to various companies doing business with Exaltexx, including two chemical suppliers and a small trucking company that hauls product from Exaltexx to one of its customers [23]. These letters made broad-ranging assertions of infringement covering Exaltexx products, and alleged that the recipients of the letters were also infringing or inducing infringement by doing business with Exaltexx [3], [15]. The letters threatened patent litigation against the companies if they refused to comply with the demand to immediately cease and desist [3]. The letters were intended to induce those companies to stop doing business with Exaltexx, and at least one, and possibly two, of the companies did cease doing business with Exaltexx as a result of the letters [118].

Sequential Unmasking of Expert Witnesses

Amgen Inc v Pfizer Canada ULC 2020 FC 522 Southcott J
            1,341,537 / filgrastim / NEUPOGEN / NIVESTYM

Wednesday’s post gave an overview of the facts and discussed the main substantive holding in this decision, namely that the invention was obvious. The decision also raises sequential instruction of expert witnesses as a way of improving the usefulness of “blinding” the experts.

Southcott J summarized the current law by accepting that “blinding is not a guarantee of reliability. Whether it is a sufficient reason to prefer the evidence of one expert over another depends on the details of the evidence in a particular case. [T]he effect of blinding is a question of relevance, reliability, and weight. It is not a doctrinal matter” [309] (citing 2016 FC 857 [59]).

Southcott J noted that some structural problems may arise that impede effective blinding. For example, effective blinding requires that the expert not have read the patent so as to avoid hindsight bias; but obviousness must be assessed from the perspective of a person skilled in the art to which the patent pertains, and it is necessary to read the patent to determine who the skilled person is.

In this case, Pfizer got around this problem in a manner that met with Southcott J’s approval. Pfizer had one expert read the patent and provide an opinion on the skilled person, and then the second expert was provided with that definition of the skilled person:

[318] This approach demonstrates a potential means of avoiding the concern about blinding creating a structural impediment to experts employing the required tools to formulate their opinions. If one expert provides an opinion defining the Skilled Person after reviewing the relevant patent, that definition can be provided to another expert, who can then give a blinded opinion from the perspective of the Skilled Person without having read the patent or the other experts’ opinions.

Southcott J remarked that while this methodology was not in itself a sufficient reason to prefer Pfizer’s experts over those of Amgen, “blinding is a factor favourable to the reliability of Pfizer’s expert opinions on the work that would flow from [the state of the art]” [320].

This calls to mind the concept of ‘sequential unmasking’ referred to by Arnold LJ in Akebia v Fibrogen [2020] EWHC 866 (Pat):

[36] This submission illustrates why it can be advantageous to try to instruct expert witnesses in sequence, first asking them about the common general knowledge, then showing them the prior art and asking them questions such as what steps would be obvious in the light of it and only then showing them the patent in suit. This is a procedure known as “sequential unmasking” in the psychological literature (see generally on this subject C.T. Robertson and A.S. Kesselheim (eds), Blinding as a Solution to Bias, Academic Press, 2016). The point of it is to try to avoid, or at least reduce, hindsight. In my opinion, it is desirable to try to minimise hindsight on the part of expert witnesses where possible. There is no rule or principle that experts must be instructed sequentially, however.

Arnold LJ went on to note that

[T]here are often real practical problems in doing so. To take just one obvious example, any discussion about the common general knowledge must start by identifying the skilled person or team. How is this to be done if the expert cannot be shown the patent? One way is to ask the expert to make an assumption, which they can check later when they see the patent; but that is not necessarily a perfect solution.

Another, arguably preferable solution to this problem, is that used by Pfizer here, namely providing the second expert with the first’s opinion as to the characteristics of the skilled person.

In any event, it seems that some form of sequential unmasking may be a real advance in terms of allowing experts to provide an effective yet properly blinded opinion.

A Two-Step Approach to Enablement?

Amgen Inc v Pfizer Canada ULC 2020 FC 522 Southcott J
            1,341,537 / filgrastim / NEUPOGEN / NIVESTYM

Wednesday’s post gave an overview of the facts and discussed the main substantive holding in this decision, namely that the invention was obvious. The decision also raised an important point regarding the proper approach to sufficiency, and more particularly enablement (how to practice the invention). I suggest the parties have gone astray, as a consequence of neglecting the FCA’s statements in Leo Pharma 2017 FCA 50 [58] and Bombardier v Arctic Cat 2018 FCA 172 [78] that the SCC decision in Teva 2012 SCC 60 did not change the law of enablement. Ultimately, the doctrinal point made no difference to the outcome, but it is worth discussing nonetheless, as it could cause serious difficulties in future cases.
In Teva 2012 SCC 60 (relating to VIAGRA), the patentee had tried to hide the fact that sildenafil was the particular compound that had been tested and found to be effective in treating ED. LeBel J for the Court stated that:

[80] As a matter of policy and sound statutory interpretation, patentees cannot be allowed to ‘game’ the system in this way. This, in my view, is the key issue in this appeal. It must be resolved against [the patentee].

Whatever one might think of the Court’s policy analysis, its statutory interpretation was the very opposite of “sound”; it would be more accurately described as a horrific train-wreck that particularly mangles s 58, which provides that claims stand or fall independently: see Siebrasse, The Duty to Disclose “The Invention”: The Wrong Tool for the Job, (2013) 25 IPJ 269. The Federal Courts have largely avoided getting tripped up by the SCC’s blithe disregard of doctrinal details and statutory text, and have instead (properly, in my view) understood Teva as representing a broad injunction against attempts to game the system, which was, after all, the “key issue” that was resolved against the patentee.

Unfortunately, Teva’s doctrinal misstep has reared its head in this case, in the context of the approach to sufficiency. The parties both accepted that

[454] In Novopharm SCC, [aka Teva] the Supreme Court set out a two-step analysis for determining whether a patent’s disclosure is sufficient. The first step is to define the nature of the invention in the patent (see Novopharm SCC at para 53). The entire patent must be considered in making this determination, not just a particular claim, as a patent is issued for one invention (see Novopharm SCC at paras 55-60). The second step is to determine whether the disclosure is sufficient to enable the skilled person to practice the invention, i.e. to produce the invention using only the instructions contained in the disclosure (see Novopharm SCC at paras 70-71). None of these principles are controversial between the parties.

The parties disputed whether both of these requirements were to be assessed as of the filing date, or whether the issue date is appropriate for the first step [455].

In my view, the issue of timing is a red herring. I suggest that the parties should not have accepted that these statements from Teva set out the proper approach, as it is wrong in principle and not required by law.

This two-step approach means that sufficiency is assessed in terms of the patent as a whole, and not on a claim-by-claim basis. That is contrary to the principle that claims stand and fall independently. Consider a hypothetical case in which the patent discloses a genus of compounds, as well as two specific especially preferred compounds A and B, all of which are novel, non-obvious, and soundly predicted to have the same utility. Suppose further that the patent provides perfectly clear directions as to how to make compound A, but it is established on the facts that the patent failed to disclose a key step in making compound B, so that it could not have been made without undue burden. (To avoid raising issues of “gaming the system,” we may assume that the failure to disclose how to make B was innocent in that the patentee used as specific brand of equipment that was crucial to success, but did not name the brand because it had not realized its importance: see eg by Badische Anilin (1898) 15 RPC 359 (CA).) The patent claims compounds A and B in separate claims. The sensible result is that the claim to A is valid, and the claim to B is invalid for lack of sufficiency. If the sufficiency requirement is applied to each claim independently, that result is straightforward. But if there is a prior step of determining the nature of “the invention,” a sensible result is out of reach. If the “invention” is compound A, does this mean that the claim to compound B is valid? If the “invention” is compound B, does this mean that the claim to compound A is invalid? If the “invention” is the genus, does this mean the claim to compound A is invalid, on the view that the claim to genus is invalid?

None of these options is a sensible result. Nor does the law force us into an absurdity. The FCA has pointed out in Leo Pharma 2017 FCA 50 [58] and again in Bombardier v Arctic Cat 2018 FCA 172 [78], that Teva did not change the law of enablement: see here. Gauthier JA made the point explicitly in Bombardier [78] (my emphasis):

Enablement (how to practice the invention) is a concept completely distinct from the disclosure of the invention itself, the latter of which was at issue in Pfizer [aka Teva].

The point at issue in the case at hand was enablement, ie that “the disclosure in the patent is not sufficient to practice this invention” [451]. Gauthier J’s holding in Bombardier therefore clearly applies: enablement is “completely distinct” from disclosure of the invention, and Teva should not have been relied on for this point.

This issue ultimately did not matter to the result. The sufficiency issue only arose if the claim was interpreted to require the claim protein to have to be pluripotent in the sense of stimulating growth in multiple cell lineages, [462]. Southcott J rejected this construction, and the sufficiency attack failed for that reason [463]. Nothing turned on the two-stag approach or the timing issue that the parties had disputed.