Potentially Conflicting Decisions of the Re-examination Board and the Federal Court

Teva Canada Innovation v Pharmascience Inc 2021 FC 367 Southcott J

2,760,802 / glatiramer acetate / GLATECT

The Patent Act s 48.1- 48.5 provide for the re-examination of granted patents by a Patent Office Re-examination Board. The Act does not, however, address the interaction between Board proceedings and parallel Federal Court litigation. As discussed here, two FC decisions, Prenbec 2010 FC 23 and Camso 2016 FC 1116, have granted a stay of re-examination proceedings pending a decision in parallel FC litigation. In the present decision Southcott J has again granted a stay of an ongoing re-examination proceeding in light of parallel FC litigation. Southcott J’s decision is entirely consistent with Prenbec and Camso, but clarifies some additional points while deliberately leaving open some other important questions. In particular, even while the re-examination proceeding is stayed, it is not terminated, and the Board will eventually render a decision [26]. What happens if the decision of the Board is inconsistent with that of the Federal Court? That is a very real prospect in this case.

A few preliminary points. The court in Prenbec held that the Federal Court has jurisdiction to order a stay of the Board’s re-examination proceedings using the standard RJR-MacDonald [1994] 1 SCR 311 test, and parties since have accepted this: [11], Camso [18]. This point therefore seems reasonably well established.

A second point is procedural. The Board in this case issued two “preliminary opinions,” the first on 17 June 2020 and the second on 22 February 2021. So far as I can tell, there is no express basis in the Act or Rules for such preliminary opinions. There is, however, an implicit basis. Section 48.3(2) allows the patentee to propose amendments as part of the procedure (so long as they do not enlarge the scope of the claims); but how can the patentee know to make an amendment unless it has some idea of what the Board thought about the original claims? So, the re-examination procedure is in effect a kind of limited re-prosecution, and the preliminary opinions were in the form of a letter to counsel for the patentee, inviting the patentee to propose new or amended claims in response.

Third, the Attorney General, on behalf of the Board, consented to the motion, and indeed made submissions in support. Evidently the AG is also concerned about the possibility of inconsistent decisions and is not seeking to prioritize the Board over the Federal Courts as a venue for patent adjudication.

On to the substantive issues. The 802 patent related to a particular dosage regimen for glatiramer acetate. Teva is the licensee of the 802 patent under the patentee, Yeda. Pharmascience is seeking to market a generic version and so served Teva with a notice of allegation [3]. While that action was underway, Pharmascience filed for re-examination. It was undisputed that the Re-examination Proceeding and the Federal Court litigation were largely duplicative, as the same issues and substantially the same prior art were at issue in both [22].

There is a twist on the facts in this case as compared with Prenbec and Camso. In those cases, there were parallel proceedings in the Board and Federal Court, but no final decision in either. In this case, a trial decision has been issued, upholding the validity of the asserted claims of the 802 patent: Teva v Pharmascience 2020 FC 1158 Kane J. That decision is under appeal, and what Teva sought was a stay of re-examination pending the outcome of the appeal.

Two main factors influenced Southcott J to grant the stay. First, he agreed with the reasoning in Camso and Prenbec that as between the two proceedings, the FC litigation should be favoured, on the basis that “Federal Court litigation generates a more comprehensive evidentiary record than does a re-examination proceeding” [35]. The main advantage of re-examination is speed and simplicity, but the more limited record means that in principle there is a trade-off with accuracy. Moreover, in this case, there has already been a FC decision, so there is not a choice as to which to stay in order to avoid inconsistent results, but only whether to stay the re-examination proceeding [36].

Pharmascience argued that the fact that the FC decision had been issued was a reason to refuse the stay, on the view that the purpose of the stay is to give the Board the benefit of the FC decision in coming to its own conclusion. Southcott J rejected this argument on the basis that to the extent the Board would be influenced by the parallel litigation, a final appellate decision would be important [37], [38].

Now, on the facts, it seems unlikely that the Board will be influenced by the FCA decision. The FC decision upholding the validity of the 802 patent was issued after the Board issued its first preliminary opinion indicating it intended to hold the patent invalid for obviousness. Kane J’s decision was released after that first preliminary decision, and Teva duly brought it to the attention of the Board. The Board then issued its second opinion, which began by expressly acknowledging that it had been notified of Kane J’s decision. The Board then said, in effect, that it would decide on the record before it, without reference to the FC decision, and it went on to again opine that the patent was invalid, without further reference to Kane J’s decision. The AG, who appeared on behalf of the Board, confirmed “the Board adjudicates matters based on the record before it, not by incorporating findings of fact by another decision-maker” [29]. Given that the Board was not influenced by the FC decision as a matter of principle, it seems very unlikely that it would be influenced by the FCA decision. This point of course did not escape Southcott J, who considered that a final appellate decision was desirable “to the extent the result in the litigation has any potential to influence the Board’s decision” [38].

So, it seems unlikely that the FCA decision will be considered by the Board, which suggests that providing the Board with the FCA decision is not a very compelling reason to grant a stay.

But there is another important factor considered by Southcott J [38]. If the Board is not inclined to take account of FC/FCA decisions, this means that there is a very real prospect of inconsistent decisions if the FCA affirms Kane J, which would be unsurprising given that her decision on the 802 patent turned largely on the facts. As just noted, it would appear that the problem of inconsistent decisions cannot be addressed by simply asking the Board to consider the FCA decision; it will have to be forced to do so, on the basis of issue estoppel, res judicata, or like principles [38]. But for issue estoppel to apply, the prior decision must be final [38]. (Apparently this includes any appeals, though I have not verified the jurisprudence on that point myself.) This was an additional reason why Southcott J decided to grant the stay [38].

Pharmascience argued that it would not be necessary to rely on issue estoppel to address the problem of inconsistent decisions, because Teva would have a right to appeal the Board decision under s 48.5 and the Board decision would be stayed pending appeal under s 48.4 [44]. However, Southcott J observed that an appeal “is not a hearing de novo and therefore does not necessarily represent a means of remedying inconsistencies resulting from the duplicative litigation” [46]. An appeal where issue estoppel cannot be argued would therefore not address the problem.

Southcott J accordingly granted the stay. Skipping over Southcott J’s careful consideration of the other aspects of the RJR-MacDonald test, this raises some interesting issues of remedy.

One relatively easy point is that Southcott J accepted the AG’s unopposed suggestion that the stay expire on discontinuance of the appeal or settlement by the parties, as well as on the appeal decision being granted [56].

The more difficult point is that the stay at best mitigates the risk of inconsistent results [36]. As noted above, the Board decision is stayed pending appeal, but not terminated [26]. If the FCA upholds Kane J’s decision, the Board will then render its decision, which will likely invalidate the claims. Apparently to address this, the AG also suggested that the Board, upon the stay being lifted, be directed to consider whether the doctrine of issue estoppel, or similar legal principle, applies to preclude the re-litigation of issues previously decided by the FC [57]. Southcott J declined to make such an order, noting that the question of the application of issue estoppel is already before the Board, having been raised by the parties, and as a matter of administrative law it would be inappropriate for the Court to weigh in on that question until it had a mandate to do so [58]. So, the real point of the stay is to ensure that when the Federal Court is faced with an appeal from a Board decision invalidating the patents, it will have the possibility of issue estoppel available in its toolkit to address the problem of inconsistent decisions. This is not to say that the Federal Court would necessarily choose to invoke issue estoppel, but it would be undesirable to foreclose that possibility.

The bottom line is that the stay was granted, but the problem of how to deal with inconsistent decisions between the Board and the Federal Court remains unresolved. The question might be answered in future installments of this litigation, if the FCA upholds Kane J’s decision in this case and the Board then issues an inconsistent decision.