Non-Standard Bifurcation in SEP Litigation

Wi-Lan Inc v Apple Canada Inc 2022 FC 276 Tabib CMJ

This decision raises an interesting procedural issue regarding SEP litigation, in particular the question of a non-standard bifurcation. (Coincidentally, last Friday’s post also dealt with a non-standard bifurcation, albeit along different lines.)

Wi-Lan, a non-practising entity (NPE) [1], is suing Apple for infringement of its 159 patent. (The full patent number is not given in the decision, but my guess is that it is 2,686,159.) While not stated in the decision, Wi-Lan appears to be a patent assertion entity (PAE), which is to say that its main business is monetizing patents through licensing to operating companies. Wi-Lan asserts that the 159 patent is a standard essential patent (SEP) which is essential to the 4G and 5G standards. Apple denies that is it an SEP, but argues that if it is, Wi-Lan is not entitled to an injunction, and its sole remedy is a reasonable royalty on FRAND (fair, reasonable and non-discriminatory) terms [8].

In this motion, Apple is seeking to bifurcate the proceedings. Bifurcation is common in patent actions. In the standard bifurcation, the first phase deals with validity and infringement, as well entitlement to an injunction and the election between an accounting and damage, though not quantification. The second stage is quantification of the monetary remedy. In this motion, Apple sought a bifurcation in which the entitlement to remedies, not just quantification, would be left to the second stage. More specifically, validity and infringement would be assessed in the first stage, but “Wi-Lan’s right to an injunction, right to delivery up of infringing devices, right to elect between profits and damages, and the calculation of profits or damages” would be left to the second stage” [2].

Why is Apple seeking this unusual bifurcation? It may be that Apple’s main objective was to put off the question of Wi-Lan’s entitlement to injunctive relief [2] (though that may be reading too much between the lines.) If so, why would Apple seek to defer the question of Wi-Lan’s entitlement to injunctive relief to the second stage?

Injunctive relief plays an outsized role in SEP litigation, and more broadly in litigation involving any ‘complex’ product which embodies a large number of patented technologies, each of which contributes only a small part of the overall value. This gives rise to the problem of ‘holdup’. As Shapiro explained in an early influential article, Navigating the Patent Thicket (2000) 1 Innovation Policy and the Economy 119, 125 consider a manufacturer of a complex product

who could, with ease, invent around a given patent, if that manufacturer were aware of the patent and afforded sufficient lead time. Clearly, in this case the patented technology contributes little if anything to the final product, and any reasonable royalty would be modest at best. But, oh, how the situation changes if the manufacturer has already designed its product and placed it into large scale production before the patent issues . . . . The patentee can credibly seek far greater royalties, very likely backed up with the threat of shutting down the manufacturer if the Court indeed finds the patent valid and infringed and grants injunctive relief. The manufacturer could go back and redesign its product, but to do so (a) could well require a major redesign effort and / or cause a significant disruption to production, (b) would still leave potential liability for any products sold after the patent issued before the redesigned products are available for sale, and (c) could present compatibility problems with other products or between different versions of this product. In other words, for all of these reasons, the manufacturer is highly susceptible to holdup by the patentee.

The problem of holdup, when it exists, means that a patentee armed with an injunction can extract a settlement that reflects not just the value of the patented technology, but some part of the sunk costs that have been incurred by the manufacturer. A very influential article on the problem is Lemley & Shapiro, “Patent Holdup and Royalty Stacking” (2007) 85 Tex L Rev 1991. I have also addressed it in a couple of co-authored pieces, namely Ch 4 Injunctive Relief in Patent Remedies and Complex Products: Towards a Global Consensus (2019) and Ch 7 reviewing the literature; and Cotter, Hovenkamp & Siebrasse, Demystifying Patent Holdup (2020) 76 Washington and Lee Law Review 1501-65.

It is injunctive relief which allows the patentee to extract sunk costs, thereby capturing a reward greater than the value of the patent. Consequently, an important part of the response to the holdup problem in US law has been to deny injunctive relief entirely to patent assertion entities, following eBay v MercExchange (2006) 547 US 388: see Seaman, “Permanent Injunctions in Patent Litigation After eBay: An Empirical Study” (2016) 101 Iowa L Rev 1949. (I’ll note that in Farmobile v Farmers Edge 2022 FC 22, [80] blogged last Friday, Farmers Edge argued that Farmobile should be denied injunctive relief because it was a non-practicing entity (NPE). NPEs include patent assertion entities, but the category also includes eg small R&D startups which invent new technology but then licence it to a larger entity for commercialization. Those types of NPEs do not practice the invention themselves, but they typically seek to assert their patent rights to secure market exclusivity, albeit for their licensee or future assignee, not for themselves. This is in contrast to PAEs, which exploit the patent by licensing, rather than by enforcing market exclusivity. The distinction between PAEs and NPEs more broadly is important when considering injunctive relief. PAEs are almost never granted injunctive relief in US law, but NPEs seeking market exclusivity are not disfavoured, or at least not as disfavoured.)

The problem of holdup also arises in the context of SEPs specifically, because standards normally embody hundreds or thousands of patented technologies, subject to a FRAND obligation to grant royalties on fair, reasonable and non-discriminatory terms. In US law, injunctive relief is rarely granted for infringement of an SEP, on the view that the patentee is contractually bound to accept a reasonable royalty.

While injunctive relief is routinely granted to a successful patentee, we have not yet had a case in Canada squarely raising the question of whether injunctive relief should be granted to a PAE in respect of an SEP [9]. This case may be the first, if it proceeds to trial, as Apple is seeking to argue that Wi-Lan should be denied injunctive relief as a matter of law if the 159 patent is determined to be an SEP [8].

With all that in mind, I can think of a two reasons Apple might have been seeking to use bifurcation to delay the question of entitlement to injunctive relief.

One reason a manufacturer of a complex product might seek bifurcation of this point is that it would operate as a kind of stay, so that the manufacturer would have time to design around the patent if it were found to infringe. The manufacturer would still be liable for reasonable royalty damages for infringement during the design around period, but this would avoid or at least mitigate the holdup problem. That is unlikely to be the motivation in this case because it is not possible to design around an SEP, unless the patented technology at issue can first be removed from the standard entirely. (I think this has happened, but it is very rare).

A more likely reason is simply to delay the date the injunction comes into force. If the patent can’t be designed around, the excess value that can be extracted by a patentee armed with an injunction depends on the value to the manufacturer of having its product on the market. The less time that the injunction holds the patent off the market, the less the excess value. If I’m right that the 159 patent is 2,686,159, it expires in 2027. If this takes a couple of years to get to the end of the first stage—say end of 2023, with four years left—and another year to the end of the second stage, the difference between the grant of the injunction at the end of the second stage instead of the first would be roughly a 25% reduction in Apple’s maximum willingness to pay.

Neither of these is a good reason in principle for bifurcation. Both of these amount to using bifurcation as a substitute for a stay of the injunctive relief. But the purpose of bifurcation is to ensure the most expeditious and least expensive determination of the outcome, and to use it as a substitute for a stay would detract from that purpose. To the extent that it is desirable to limit injunctive relief, it should be done directly, by the court refusing injunctive relief entirely on substantive grounds, or tailoring the injunction to allow a design around. And in this decision Tabib CMJ refused to bifurcate because she found that “Apple has not met its onus to show that bifurcation would result in the just, most expeditious and least expensive determination of the issues on the merits in the circumstances of this case” [20].

Another reason Apple might be seeking a stay is to avoid having to argue the law with respect to entitlement to injunctive relief. As noted above, injunctive relief is routinely granted to a successful patentee. However, we have never had a case addressing entitlement to injunctive relief in respect of an SEP, and particularly when asserted by a PAE. SEP cases are clearly distinguishable in principle because of the FRAND agreement. PAE cases are also distinguishable in principle, as the US eBay approach illustrates—it is pretty clear that Wi-Lan would be refused injunctive relief in US law. I am not* necessarily of the view that the US approach should be adopted, either broadly or in its specifics; whatever one might think of the practical outcome, the eBay court’s doctrinal analysis is very suspect: see Gergen, Golden & Smith. 2012. “The Supreme Court's Accidental Revolution” (2012) 112 Colum L Rev 203. (And see Ch 4 of Complex Products for a more detailed discussion.) Moreover, European law is more favourable to injunctive relief in SEP cases, following Huawei v ZTE (2015) Case C-170/13. But the split in approach between US and European law serves to emphasize the difficulty of the issue. In my view, this is a difficult and novel point of law. If Apple prevailed on the merits, then Wi-Lan’s entitlement to injunctive relief would not arise, and it would not be necessary to argue the point. It would be understandable for Apple to try to avoid making this novel legal argument if it didn’t have to, and in my view, that would be consistent with the purpose of bifurcation.

On this point,

[19] Apple submits that delay in the determination of Wi-Lan’s entitlement to an injunction is just, because it would not be in the public interest to grant an injunction at all. Such an argument presupposes the ultimate favourable determination of Apple’s arguments on the merits. They require the Court to assess the merits and conclude that Wi-Lan’s claim to injunctive relief is most likely to fail. These arguments are, as discussed above, not factors that the Court should consider on a motion to bifurcate.

If, as this passage indicates, Apple’s argument turns on the point that injunctive relief should not be granted at all, then I agree that this is not a point that can be decided on a motion to bifurcate, without the benefit of full argument on a difficult legal point.

But it is a different matter if the argument is that there will be a saving by not having to argue the point at all if Apple prevails at the first stage. This brings us to the arguments “discussed above,” which evidently refer to this paragraph:

[12] It is untenable at law to take into account, in considering whether a bifurcation might result in substantial savings, that the cost of determining remedies would be entirely saved if the plaintiff were to fail to establish liability. If one is to consider significant or substantial savings as a reason to bifurcate, then those savings must come from the likelihood that the determination of the first phase issues would inherently lead to a narrowing of the issues in the second phase, whatever that determination may be.

I have to say I don’t find this persuasive. Suppose that the first phase will not lead to any narrowing of the second phase issues at all. There are no doubt some additional expenses inherent in bifurcation, so that if exactly the same issues will have to be litigated whether or not the case is bifurcated, the costs will be higher. This is a thumb on the scales against bifurcation.

But on the other hand, we know as a practical matter that many litigated patents are held to be invalid. This is not happenstance—parties will settle rather than litigate if both sides are confident as to liability, one way or other. Parties only choose the expense of litigation if there is a real dispute as to validity or infringement. Only the hard cases get litigated, so we expect to see, and what we do see, is that success more or less equally divided, overall. There will be a very substantial cost savings in all of those cases that don’t have to proceed to the liability phase at all. Moreover, there are often significant cost savings even in cases in which the patentee prevails, as the parties often settle before the second phase. Thus, on average bifurcation leads to substantial cost savings even if the issues are not narrowed at all. While it is true that a motions judge can’t predict in advance whether the particular case before her will be one of those in which there are substantial cost savings, I don’t see any reason to ignore the reality that bifurcation is likely to lead to costs savings on average.

The argument against seems to be that taking into account the cost savings that would result if there is no need to go to the liability phase would require an assessment of the merits, which is inappropriate at the very early stage where bifurcation is normally ordered [19]. That would be a strong objection if the bifurcation decision rests on a mathematical balancing of the expected costs of proceeding one way or the other. But that is not done, and it is not required. As Tabib CMJ noted, the combination of Rule 3 and Rule 107 means the basic question whether “is it more likely than not that a bifurcation order would result in the just, expeditious and least expensive determination of the proceeding on its merits, so as to justify depriving the Plaintiff from its basic right to have all its issues resolved in one trial” [4]. The Prothonotaries have considerable discretion of make such orders in light of their extensive experience in managing complex litigation. I see no reason that an appreciation of the practical cost savings should be a thumb on the scales in favour of bifurcation, on the other side. Against this is the idea that the patentee has a “basic right” to a single proceeding. This was articulated in Elcano v Richmond (1986), 55 OR(2^nd) 56, 59, quoted with approval in Bristol-Myers Squibb v Apotex 2003 FCA 263 [7]; but in Bristol-Myers Squibb v Apotex the FCA went on to say that “When an experienced specialist bar like the intellectual property bar commonly consents to the making of a bifurcation order, it is open to a judge to infer that, in general, such an order may well advance the just and expeditious resolution of claims” [9]. As I read it, this statement acknowledges that bifurcation results in costs savings on average, and holds that it is permissible for the motions judge to take this into account.

This is not to say that Tabib CMJ should have granted the motion for bifurcation in this case. Her decision turned on a number of other considerations specific to the motion, which I have not touched on. But it does seem to me that the fact that bifurcation can reduce costs by eliminating the need for a second stage if the alleged infringer prevails at the first stage, or if the parties settle, is a legitimate consideration in deciding whether bifurcation should be ordered.

*The original post omitted the word "not". My policy is not to make substantive changes to my posts, but I usually correct minor typos without comment. In this case, I always intended to say "not" - I trust that was clear from the context - but I thought I should make it clear that I was not trying to surreptitiously change my mind.

Non-Standard Bifurcation Refused

Farmobile, LLC v Farmers Edge Inc 2022 FC 22 McHaffie J

            2,888,742

This decision relates to a motion by Farmobile seeking to amend its pleadings to allege that the defendant, Farmers Edge, continued to infringe the 742 patent even after a recent software update that was intended to implement a non-infringing alternative; as well as a motion by Farmers Edge seeking amendments in response, which included new invalidity defences. I don’t go into these issues, which turned on the facts. Of more general interest, Farmers Edge’s also moved for a non-standard bifurcation. Patent actions are commonly bifurcated between liability and damages [113]. The first phase normally deals with validity and infringement, as well entitlement to an injunction and the election between an accounting and damage, but does not deal with quantification. In this case Farmers Edge’s proposed a bifurcation in which the first phase would deal with pre-update infringement issues, certain validity issues and inventorship, and the second phase would deal with post-update infringement, remedies—including injunctive relief—and certain residual validity issues [115]. McHaffie J had refused to permit the amendments introducing the residual validity issues, and as a result the motion was effectively to request bifurcation between validity and pre-update infringement in the first phase, and post-update infringement and remedies in the second [134].

While McHaffie J noted a non-standard bifurcatrion is possible—“Rule 107 does not limit the Court to a particular approach to bifurcation, provided it will lead to the just, expeditious, and least expensive determination of the matter on its merits” [114]—he nonetheless refused to order the proposed bifurcation. In part this was because of factors unique to this case, such as scheduling, but in part his decision turned on more general considerations.

First, with respect to Farmers Edge’s originally proposed bifurcation, he noted that:

[133] Farmers Edge’s suggestion that it be permitted to pursue some invalidity arguments at the first trial, holding back other invalidity arguments to be made if and when it is found to infringe some of the claims, appears entirely unworkable and unfair. In addition to having to recall expert witnesses to address related issues, it would put the Court in the position of attempting to determine infringement of claims whose validity had not ultimately been determined, while Farmobile would have to face a serial approach to invalidity arguments.

As noted, McHaffie J had refused to permit amendments introducing the new validity argument, and the point was therefore moot [144], but the general observation may provide guidance in future cases.

On the pre-/post-update bifurcation, he noted

[135] I can see no efficiencies in having experts and lay witnesses reattend at a second trial to address further infringement allegations regarding related, and in some cases overlapping, patent claims and software and hardware systems that will largely be the same. The issues are clearly interwoven. Dividing the infringement issues would mean that witnesses, experts, counsel, and the Court would all have to get back up to speed on the same technologies and readdress some of the same issues, even assuming the same counsel and trial judge are involved at the second trial.

[137] It is certainly possible that one or more of the issues Farmers Edge proposes be decided at the first trial could obviate the need for a second trial entirely. If, for example, the Court concludes that Farmers Edge is the proper owner of the ’742 Patent, or that the entirety of the patent is invalid on grounds of anticipation or obviousness, no second trial would be necessary. However, while this does not alone justify a serial approach in which various arguments are raised at different stages. The opposite possibility that Farmers Edge is not successful on these issues, and the efficiencies of having to conduct a second trial in such circumstances, must also

For these reasons, in addition to various reasons turning on the facts, he refused to order bifurcation [138].

What Does “For” Mean?

Allergan Inc v Apotex Inc 2022 FC 260 Kane J

2,602,188 / risedronate / ACTONEL DR

As noted in my last post, the 188 patent at issue in this case claims a dosage form of a bisphosphonate “for use with or without food” in treating osteoporosis. The product monograph for Apotex’s product—like Allergan’s—provided that it was to be taken with food. Consequently, Allergan argued that “for” product claim is normally construed as meaning “suitable for”, relying on MacOdrum, Fox 5^th ed ch 8.9(c) (§ 8:57 in 2/2022 update I have) and cases cited therein [182], [901]. The idea is that Apotex’s product is suitable for administration with or without food, in the sense that it would be effective in treating even if, in light of the product monograph, it are not intended for that purpose. Kane J rejected this, essentially on the basis that even if “for” is normally interpreted as “suitable for”, that is not strict rule, but rather, as MacOdrum notes, it is at best a generalization that should be cautiously applied [903]. Instead, as discussed in my last post, she held that in the context of the 188 patent, “for” should be construed as effectively meaning ‘intended for’. That’s enough to dispose of the point in this case, but since I read a number of cases on the interpretation of “for”, in this post I will discuss the issue more broadly.

The cases reveal a few possible meanings for “for”:

(1) suitable for;

            (2) actually used for;

(3) intended for;

            (4) suitable and intended for.

I’ll argue that many of the authorities cited for the proposition that “for” means ‘suitable for’, actually stand for the proposition that “for” does not mean ‘actually used for’. Such holdings are not inconsistent with construing ‘for’ as meaning ‘intended for’ or ‘suitable and intended for.’ While I did not exhaustively review the cases, the cases I did read can largely be reconciled by interpreting ‘for’ as meaning ‘suitable and intended for.’

There does not appear to be much Canadian authority explicitly addressing the meaning of “for” (though there are of course many Canadian cases construing claims with “for” in them). All of the authorities cited by MacOdrum are English. The conventional view in UK law is that “for” means ‘suitable for’, with an exception for second medical use claims, where “for” means ‘intended for’: see Virgin v Delta [2011] EWCA Civ 162 [19]–[23], providing a list of cases; FNM v Drammock [2009] EWHC 1294 (Pat) [56]-[74]; EPO Guidelines § 4.13.1. The second medical use exception is explained as an ad hoc departure from the general rule because of the need to allow second medical use claims: see FNM [2009] EWHC 1294 (Pat) [60]–[72]; EPO Guidelines § 4.13.1 last sentence.

As noted in Zeno [2009] EWHC 1829 (Pat) [26], the origin of the rule appears to be Adhesive Dry Mounting v Trapp (1910) 27 RPC 341 (Ch) 352–53. In Adhesive Dry Mounting, the question is whether “for” should be construed as meaning ‘suitable for’ or as meaning ‘when actually used for.’ The claim was “For carrying into practice the process [specified] a pellicle [as specified]” and the question was

whether it claims the pellicle therein described, or merely the use of this pellicle in the process claimed in the first Claiming Clause. If the former, the Letters Patent would entitle the Patentees to prevent the use of such a pellicle by others, whatever might be the purpose for which it was used. If the latter, the Letters Patent would only entitle the Patentees to restrain the use of such a pellicle in any process substantially the same as the process referred to in the first Claiming Clause.

Parker J chose the former construction, in part because another claim was to the process, and the claim at issue would be largely redundant if it was to the pellicle only when used in the process. Of the cases listed in Virgin v Delta, Insituform v Inliner [1992] RPC 83 (Pat) 95–96, Coflexip v Stolt [2000] EWCA Civ 242 [23]–[27] and Vericore v Vetrepharm [2003] EWHC 1877 (Ch) [15] were also cases in which the question was also whether “for” should be construed as meaning ‘suitable for’ or as meaning ‘when actually used for,’ and in all cases the court held “suitable for” was correct. I have not read any case in which “for” on its own was construed as meaning ‘when actually used for’ and this point seems well-established, at least as a strong presumption.

Every case must be read in light of the arguments before the court, and cases holding only that “for” should be construed as meaning ‘suitable for’ rather than ‘actually used for’, are not good authority for the proposition that it should be construed as meaning ‘suitable for’ rather than ‘intended for.’ The caselaw is more equivocal on the whether “for” means ‘suitable for’, or ‘intended for’—or perhaps even ‘suitable and intended for’. This was acknowledged by the EWCA in Virgin v Delta at [23], in which Jacob LJ noted that “in Zeno Lewison J seemed a little sceptical about this rule of construction. He wondered, having only been shown Adhesive Dry Mounting and Coflexip, whether for might not be construed as intended for at least in some cases depending on the specification as a whole.” The EWCA went on to note that in second medical use cases it usually does mean ‘intended for’, and then remarked that “even then the claim would mean suitable and intended for” [23]. The EWCA did not explore the possibility further, as it made no difference on the facts.

The EPO Guidelines § 4.13.1 does say that “for” means ‘suitable for’, but the main point is that an apparatus which is not suitable for the stated purpose “is normally not considered as anticipating the claim.” It is sensible to say that a claim “for” some purpose does not encompasses a thing that is unsuitable for that purpose; but that does not imply that “for” means ‘suitable for’. In particular, that view is also consistent with construing “for” as ‘suitable and intended for.’ (There is a separate question as to what ‘suitable for’ means–see eg Bühler v Satake [1997] RPC 232, 239-240—and much of the discussion in MacOdrum is taken up with this point.)

If “for” means ‘suitable and intended for’, both terms play a role. A device that is intended for the claimed purpose but is not suitable for it, would neither infringe nor anticipate. That much seems uncontroversial. A device that is suitable for the claimed purpose would not infringe unless also intended for that purpose. Leaving aside medical use claims for the moment, would a product or apparatus that was suitable for a particular use, but not intended for that use, anticipate a claim to the product or apparatus for that particular use, if the use of the product for that purpose was new and non-obvious? The EPO Guidelines § 4.13.1 say it would—“if the known product is in a form in which it is in fact suitable for the stated use, though it has never been described for that use, it deprives the claim of novelty”—but cites no cases. Moreover, the Guidelines then go on to acknowledge that a claim to a known substance for medical use is an exception—an exception which largely swallows the rule. And as a matter of principle, if disclosure of a compound does not anticipate a claim to the use of that compound for a medical use, why would it anticipate a claim to the use of that compound for a non-medical use? If Compound X is known in the prior art, but no uses are known, it is a bit odd to say that a claim to “Compound X for use in treating psoriasis” is valid, but “Compound X for use as a herbicide” is invalid. Drawing a distinction between a compound and a device seems similarly unprincipled.

This point was tangentially addressed in Adhesive Dry Mounting. Parker J held at 353 that “for” was to be interpreted as meaning ‘suitable for’ and consequently, he held that the claim was anticipated by a prior art patent which disclosed the same type of pellicle, even though the prior art did not suggest that it could be used for the specified purpose:

But after [the prior art patent] it was open to all the world to make and sell such a material. The idea of using an old material for an entirely new purpose, not being analogous to purposes for which it has theretofore been used, may be good subject-matter, but such idea, however ingenious, can hardly justify a claim for the material itself.

But if “for” is construed as ‘suitable and intended for’, then a claim to an old material for a new use is not a claim to the material itself. Parker J seems not to have contemplated the possibility that it might be construed to mean ‘intended for’.

While second medical use claims are now well-established, second use claims more generally are also established, though less common in practice. In the well-known cases of Hickton's Patent (1909) 26 RPC 339 (CA), cited with approval in Shell Oil [1982] 2 SCR 536, 550, the invention was for a method of equalizing thread usage on lace making machines. Some sections of lace are thick with thread while others are quite open, with the result that some bobbins would use up their thread more quickly than others. Equalization had previously been accomplished by interchanging the bobbins by hand, but this saved thread only by wasting time. Hickton’s invention was to equalize by occasional “shogging” or sideways shifting of the bobbins relative to the carriers, so that a bobbin initially used for a thick part of the pattern would be shifted to a more open section. Shogging itself was not new, as it was used in some types of machines to create the lace pattern itself. Hickton’s innovation was to realize that shogging could be used to equalize thread usage. Claim 1 was to shogging “for the purpose of” equalising [thread consumption], and Claim 2 was to a “means” for the same purpose; in other words, to an old process and old device for a new purpose. These claims were held to be valid.

Zeno [2009] EWHC 1829 (Pat) also raises the issue. The patent claimed a device “for the local thermal treatment of insect stings” by means of heat. The allegedly infringing ‘Zeno’ device was for the treatment of acne by means of the application of heat, with a specified temperature range and time interval. The argument was that the Zeno infringed because it was suitable for the treatment of insect stings, even though it was not intended for that purpose. In the circumstances, it is understandable that Lewison J expressed skepticism of the rule that “for” should be interpreted as ‘suitable for’. While he was “content” to proceed on that assumption, he found that the Zeno was non-infringing because it was not capable of being operated within the specified range and time interval [59]–[65]; we should not infer that he would necessarily have been content to accept that construction if it had affected the outcome.

I note that in Corevalve v Edwards Lifesciences [2009] EWHC 6 (Pat) Mr Prescott QC, stated that “if a piece of prior art is as a practical fact capable of being used for a certain purpose, it may anticipate a patent claim even though it would never occur to anyone so to use it,” citing Adhesive Drive Mounting as an example, and citing no other authority. I suppose it is true to say that a product suitable for a purpose “may” anticipate a claim for that purpose, but it would be wrong to say that it “will” anticipate, as Hickton’s Patent illustrates. As discussed, Adhesive Drive Mounting is weak authority, as it does not consider whether intend might be relevant to a claim “for” a purpose, but simply assumes that it is equivalent to a claim to the product itself. And the discussion in Corevalve was merely preliminary dicta in any event; the defendants device was not only suitable for, but also intended for, the specified purpose, and it was held not to infringe because it did not incorporated an entirely separate element [62]–[65].

To summarize, the cases I have looked at are generally consistent with construing ‘for’ as meaning ‘suitable and intended for.” In Delta v Virgin, for example, the claim was to a passenger seating system “for an aircraft” and the question was whether this encompassed the defendant seating system kits, prior to their actual installation; the EWCA held that it should, on the view that a system “for an aircraft” should be construed as meaning a system suitable for an aircraft, and not as being limited to a system when actually fitted on an aircraft [24]. There was no question that the defendant’s system was intended for use on an aircraft. In FNM v Drammock [2009] EWHC 1294 (Pat) the claim was to a composition for use as a cooling spray [20]. Arnold J construed this as meaning suitable for use as such, but this does not appear to have made any difference to his conclusion that the invention was anticipated, as the anticipatory prior art expressly identified use as a cooling spray, or gave examples to that effect—see [170], [175], [180], [184].

Finally I’ll come back to medical use claims. Three of these were raised in argument, namely Sanofi-Aventis v Novopharm / ramipril 2007 FCA 167, AB Hassle 2001 FCT 1264 affd 2002 FCA 421, and Bristol-Myers Squibb 2017 FC 1061. Kane J distinguished AB Hassle by saying the claims

[878] are not similar to the claims at issue. As noted by the Court, there were no claims for the compound, unlike the present case. The claim at issue in AB Hassle was only the use to treat a condition previously not claimed as a use. AB Hassle dealt with the more typical scenario of a claim for the new use of an existing compound or product.

The discussion of the other two cases was to a similar effect. As I understand it, Kane J’s point is that these are not simply claims to a compound “for” a particular purpose, but claims to the “use. . . for”. (Claim 1 of the 668 patent in AB Hassle and Claim 1 of the Bristol-Myers Squibb 496 patent were Swiss-from to “Use of [compound] for the manufacture / production of a medicament for / effective in the treatment of [specified disorder]. Claim 1 of the Ramipril 089 patent was to a compound “for administration”, which is similar to a use claim.) So, while “for” might be interpreted as ‘suitable or intended’, the “use” or “administration” elements additionally implies actual use. This seems right to me. If “use. . . for” merely meant ‘suitable for’ or ‘suitable and intended for’, a generic selling a drug for the specified purpose, in the sense that the product monograph specified the claimed purpose, would be liable as a direct infringer; but this situation is invariably treated as a matter of inducement, which implies the actual use constitutes the direct infringement.

In any event, I’ve gone on much longer than I had intended on this point, given that Kane J’s holding ultimately turned on her construction of the specific patent, which, as noted in my previous post, is in an somewhat unusual form. I won’t go on to review every case I looked at in detail, and in any event, I didn’t attempt to track down all the relevant cases. What I will say is that the cases I did review are consistent with construing “for” as meaning ‘suitable and intended for.’ This interpretation of “for” has the advantage that second medical use claims need not be seen as an unprincipled outlier, though subject to the observations about the meaning of “use”.

Allergan v Apotex / Risedronate Dosage Form — Overview

Allergan Inc v Apotex Inc 2022 FC 260 Kane J

2,602,188 / risedronate / ACTONEL DR

This very long decision—262 pages and 946 paragraphs—turns largely on its facts. The length of the decision is a consequence of Kane J’s very thorough recitation of the arguments and evidence. The main point of interest arises from the somewhat unusual claim.

Allergan’s 188 patent relates to a dosage form of a bisphosphonate for use in treating osteoporosis. Bisphosphonates were well known for use in treating osteoporosis. Bisphosphonates were known to have poor bioavailability. One specific known problem was significantly lower absorption when taken with food—the “food effect”. The food effect was thought to be due to bisphosphonates forming complexes with ions, such as calcium and magnesium, from the food in the stomach. (Bisphosphonates were known to be absorbed in the small intestine.) The standard way of addressing the food effect in the prior art was to prescribe the bisphosphonate to be taken while fasting. This gave rise to compliance problems [273].

Allergan came up with a solution to the food effect, namely a dosage form comprising a combination of bisphosphonate with EDTA in an enteric coating. The enteric coating allows everything to pass into the small intestine, where the EDTA—a known chelating agent—binds to the cations and prevents them from binding to the bisphosphonate. This means that the dosage would be equally effective whether given with food or after fasting. Accordingly, Claim 1 of the 188 patent was to “An oral dosage form of a bisphosphonate for use with or without food or beverage intake, comprising...” All the claims incorporated the “for use with or without food” limitation. The “with or without” food structure of the claim is a bit odd, as “or” is normally used to signal alternatives, so that it might have been separated into two claims, one claiming use with food and one without. But given that the purpose of the invention was to overcome the food effect, the experts agreed, and Kane J held, that the claim should be construed to mean that the oral dosage can used “either with food or without food or beverage at the preference of the patient” [228]. That seems right to me.

But there’s a catch. Giving EDTA without food can cause irritation of the esophageal lining. Even though this was apparently an uncommon and fairly minor problem, and did not affect efficacy in treating osteoporosis, the product monograph for Allergan’s product, ACTONEL DR, consequently specified that it should be taken with food. The Apotex PM was essentially identical [905]. Consequently, Kane J held that Apotex’s product did not infringe, either directly or by inducement, because it was not for use with or without food, but only with food [921].

Kane J’s construction seems right, given the phrase “for use with or without food” in the claim. But I am puzzled as to why the patentee included those words in the first place. Kane J said this:

[225] For the ‘188 Patent, the ability to use the oral dosage form either with food or without food is set out in the claim because its purpose is to overcome the food effect (which is the problem of the extremely low absorption of the bisphosphonate when taken with food as opposed to when taken fasted). The oral dosage can be taken either with food or without food at the choice of the patient and the treatment effect will be similar (i.e., pharmaceutically effective absorption). The invention of the ‘188 Patent signalled a significant change in the administration of oral bisphosphonates, hence the emphasis on this feature.

It’s true that the advance was to allow a formulation that can be taken without food as well as with it, and it may be that is what motivated the applicant to include this phrase. But that does not mean that this feature has to be included in the claim itself. (I should note that this explanation was not central to Kane J’s reasoning, as it was not disputed that “with or without food” was an essential element.) So long as the compound itself is new, the purpose need not be specified: if an inventor comes up with a new drug that is useful for curing cancer, they are entitled to claim the compound per se, without restricting it to the use in curing cancer. In this case, the claimed composition* was new: it was essentially a selection over the closest prior art, a prior Brazilian patent application referred to as BR 601: see eg [366], [372]. So I’m at a bit of a loss to explain why it was included.** If the phrase was indeed unnecessary, that suggests the possibility that “for use without or without food” is not an essential element, but this argument was not run by Allergan [188]. So I presume there was some reason for including the phrase that is not apparent from the decision. I wonder if the phrase might have been added to placate an obstinate examiner? I note that even if it was added in response to an objection, it is not clear that this precludes a finding of non-essentiality: see Actavis [2017] UKSC 48 UKSC.

Allegan also argued that “for use with or without food” should be construed as meaning only ‘suitable for’, not intended for. Kane J rejected this argument, which I’ll discuss at more length in my next post.

In light of this construction, infringement turned on the factual issue as to whether the PM instructed use with food, or whether taking with food was optional. Allergan’s argument was to the effect that a skilled person would recognize that it would be effective if taken without food, since the side effects were minor. Nonetheless, as Kane J found [905]–[922], the PM clearly and repeated instructed that the product should be taken with food: eg ““Do not take ACTONEL DR before food or on an empty stomach. . .” That this instruction was to avoid abdominal pain rather than to enable effective absorption does not change the fact that the product was for use with food. Apotex’s PM was the same, and so Apotex did not infringe directly or by inducement.

There are a couple of other points to note. One of the expert witnesses had been ‘blinded’, but Kane J was not impressed: “I note that the jurisprudence is mixed on the treatment of blinded evidence. I favour the approach noted in Janssen Inc v Apotex Inc, 2019 FC 1355 at paras 58-59 . . . that blinded opinions are not necessarily given greater weight just because they are blinded.”

Another point is that the most relevant prior art, a prior Brazilian patent application referred to as BR 601, was obscure prior art; that is, it was available to the public, but it would not have been found by a skilled person in a reasonably diligent search [634]. This raised on the facts the holding in Hospira 2020 FCA 30 that the state of the art for the purposes of an obviousness attack includes all prior art. In my post on Hospira, I suggested that this holding leaves open the question of whether obscure prior art can be mosaiced in an obviousness attack.

Kane J noted that

[635] In accordance with Hospira at para 86, it would be an error for the Court to exclude BR 601 from the mosaic of prior art because it would not be found by the skilled person in a reasonably diligent search.

[636] As guided by Hospira, the likelihood that BR 601 would not turn up (and, based on the evidence, it would not turn up) is relevant to the obvious to try test; i.e., would the skilled person have thought to combine BR 601 with the other prior art to bridge the differences between the state of the art and the invention?

She then noted that

[637] This is a tricky distinction when applied to the facts. If BR 601 is part of the prior art, then the differences between the state of the art and the invention would need to account for whatever can be distilled from BR 601 as part of the “state of the art”. However, if the skilled person would not have found BR 601, how can the skilled person consider it in the context of combining it with other prior art at the obvious to try stage of the analysis of obviousness? This is only possible in circumstances where the unknown prior art is handed to the skilled person. To avoid this dilemma and running afoul of Hospira, I have considered BR 601 as if it were prior art, but as noted, the “teaching” of BR 601 requires careful scrutiny.

Ultimately, Kane J did not have to wrestle too directly with this “tricky distinction”, because, as I read it, BR 601 simply would not make the 188 patent obvious, no matter how it was used. BR 601 was at best a broad genus than encompassed the claimed invention, but did not point to it with any specificity, and did not give any hint of the special advantages of the 188 dosage form.

*The original version of the post said the "compound" was new: that is not correct. It is the claimed composition that was new. 

**Since the composition was new, it seems to me that it could have been claimed as such, without that phrase, in the same way a new compound can be claimed without specifying the use. 

Reduced Costs

Janssen Inc v Teva Canada Ltd 2022 FC 269 Manson J

             2,655,335 / paliperidone palmitate / INVEGA SUSTENNA

This is the costs decision stemming from Janssen v Teva / paliperidone 2020 FC 593 (blogged here and here), in which Manson J awarded costs to the plaintiffs, Janssen. I don’t always blog on costs decisions, but this one is notable for a significant reduction of both fees and disbursements, which is something I haven’t seen much in reported costs decisions. The parties had agreed prior to the issuance of the judgment that costs were to be set at 35% of the successful party’s actual fees. Manson J found the plaintiffs’ reasonable legal fees were 70% of actual fees claimed [22], and that the reasonable disbursements were 80% of the claimed amount [24]. Costs were awarded as 35% of the reduced amount.

Burden in Summary Trial Clarified

Janssen Inc v Pharmascience Inc 2022 FC 62 Manson J

Janssen Inc v Apotex Inc 2022 FC 107 Manson J

             2,655,335 / paliperidone palmitate / INVEGA SUSTENNA / NOC

These are effectively companion cases, in which the underlying actions were brought by Janssen under the new NOC regulations against Pharmascience and Apotex, respectively, on the basis that their proposed paliperidone palmitate products would infringe Janssen’s 335 patent. In response, both Pharmascience and Apotex brought motions for summary trial, seeking a declaration that their products would not infringe. The key issues were the same in both cases: was the matter appropriate for summary trial; and was the second prong of the Corlac test for inducement satisfied. The outcome was also the same in both cases: summary trial was appropriate, and infringement was established. The summary judgment point is better developed in the Pharmascience case, but some of the substantive arguments are easier to understand in the Apotex case. Unless otherwise indicated, paragraph numbers refer to the Pharmascience decision, just because I happened to read it first. Heavy redactions in both cases make it difficult to fully understand a number of substantive issues.

On the procedural issue, the main point of note is that Manson J clarified the burden on a summary trial:

[57] [W]hile on a motion for summary trial, the burden is on the moving party to demonstrate that a summary trial is appropriate, once the onus of the merits of the matter, in terms of either infringement or validity, are before the Court for determination, the burden and onus of proof of the underlying action applies.

This seems right to me on the authorities reviewed by Manson J, and as a matter of policy. A summary trial is a procedural means for expeditious resolution of a matter, and if the burden were different from the underlying action, it might instead be used strategically to affect the substantive outcome.

On the substantive point, the 335 Patent relates to a dosing regimen for long-acting injectable paliperidone palmitate formulations for the treatment of schizophrenia and related disorders. It claims a dosage regimen comprising 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 on day 8; and subsequent maintenance doses of 75 mg-eq monthly thereafter [19]. There are various types of claims, including product claims to prefilled syringes adapted for administration accordingly, use of the dosage form, Swiss-form claims, and claims to the dosage form adapted for administration accordingly [10].

Janssen conceded that the defendants would not directly infringe, because their product does not contain one of the essential elements of the claimed invention—though we don’t know which element, because of the redactions.

Janssen therefore relied entirely on inducement [89]–[90]. The standard Corlac 2011 FCA 228 test for inducement has three parts: (1) direct infringement by a third party; (2) the inducer influenced the third party to the point that the infringing act would not have occurred without the influence; and (3) the defendant knew that its influence would bring about the infringing act: [93].

On the first part, Janssen argued that the direct infringement will occur by prescribing physicians. The main issue on this point relates to the absence of the essential element from the generic product. I gather that the generic products would be packaged without one of the essential elements, but the missing element would be supplied at the point of administration: [JvA 119]. (This is one of the points that is difficult to understand because of redactions.) The generics apparently argued that the first prong of the Corlac test was not established in such circumstances. Manson J disagreed:

[JvA 116] The first prong of the inducement test requires that the “act of infringement must have been completed by the direct infringer” [Corlac at paragraph 162].

No direct contact is required between the inducer and the direct infringer [citing Hospira 2020 FCA 30 [26].

There is also no requirement that the alleged inducer supply all components or elements of the claimed invention [citing Copeland-Chatterson (1906), 10 Ex CR 224; MacLennan 2008 FCA 35, MacLennan v. Produits Gilbert Inc., 2008 FCA 35 [MacLennan]; Hospira FC 2018 FC 259; Janssen v Apotex / ZYTIGA 2019 FC 1355

This is straightforward—if the defendant supplied the whole invention, it would typically be a direct infringer. The doctrine of inducement was developed precisely to address the situation when the defendant does not supply all the components of the invention; the factual basis of an action for inducement is typically supply of an unpatented product by the indirect party, which is then used by the direct party to infringe the patent at issue. So, in MacLennan the patent claimed “a saw tooth and tooth holder combination” and the defendant supplied only the tooth, and, as Manson J put it, “the Court found liability for inducement despite the inducer supplying only one-half of the claimed invention” [102].

The key issue was the second prong of the Corlac test. In my view there is some uncertainty as to the whether strict “but for” causation is required on the second step. Manson J discussed this issue in Janssen v Teva 2020 FC 593, which dealt with the same patent, concluding that strict “but for” causation is indeed required: see here. Unsurprisingly, in this decision, Manson J reaffirmed that strict “but for” causation is required for inducement [123]–[124]. An appeal of Janssen v Teva is pending [19], so we may learn more in due course.

The only act of inducement alleged was the product monograph, as is typical in these pharma inducement cases. An initial question is whether the defendants’ PM instructed an infringing use of the defendants’ product. Manson J answered in the affirmative on the facts, though the reasoning is impossible to follow due to the redactions.

A second point arose because the experts all agreed that the ultimate dosing decision is based on physician skill and judgment, not the language in the product monograph [JvA 132], and the question was whether this precluded a finding of inducement. A third point is whether the physicians actually pay any attention to the PM—this is a factual point that has been contentious in a number of recent inducement cases. Again, the details of Manson J’s reasoning on these points is difficult to follow due to the redactions, but he did ultimately find on the facts that“[n]otwithstanding the exercise of skill and judgment by prescribing physicians in selecting the dosing regimen for patients, the evidence before the Court in this case establishes that acts of infringement will be influenced by the acts of the alleged inducer, Apotex, to the point that, without the influence, direct infringement will not take place” [JvA 147] and he was satisfied that Janssen had proven that “at least some prescribers” will be sufficiently influenced by PM to establish inducement [JvA 148].

There are a couple of noteworthy developments on the third prong, the knowledge requirement. Manson J noted that knowledge is not restricted to actual knowledge “but also what Apotex [the alleged inducer] ought to know” [JvA 159]. This is consistent with Hospira 2018 FC 259 [334]–[335], but I am not aware of any other caselaw on this point.

Manson J went on to say that in any event “Apotex can now ‘reasonably be expected’ to have the required knowledge given that Janssen’s experts have stated that some physicians will be influenced by the Apotex product monograph to infringe the claims of the 335 Patent” [JvA 159]. This implies that in any case in which the first two prongs are established, including actual influence, and the allegation of inducement fails only on the knowledge prong, the plaintiff will not be entitled to damages for past infringement, but it will nonetheless normally be entitled to injunctive relief to prevent any future infringement.

Thus Manson J has lowered the bar on the knowledge requirement in these respects, or more precisely, has clarified that the bar is low. A low bar on the third prong is broadly consistent with the existing jurisprudence: I am not aware of any case of inducement which has failed solely on the knowledge prong, if the first and second prongs were satisfied.