Are Successive NOAs Permitted in Respect of the Same Patent?

Janssen Inc v Apotex Inc 2023 FC 912 Manson J

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

This summary judgment motion raises a tricky question on the application of res judicata / abuse of process. Apotex sought to launch a generic form of paliperidone and had to address Janssen’s 335 patent. In its initial NOA, Apotex alleged it would not infringe; it did not allege invalidity [12]. That led to a summary trial in which Apotex alleged non-infringement without challenging the validity of the 335 patent. Apotex lost, but an appeal is ongoing: see Janssen v Apotex 2022 FC 107 (see here) [14]–[16]. Apotex then amended its NOA to allege invalidity, without alleging non-infringement [17]. Janssen brought this motion for summary judgment, on the basis that Apotex was precluded from raising the defence of invalidity, on the basis of res judicata or abuse of process.

Manson J held that the issue was suitable for summary judgment as it turned solely on the application of the law to settled facts [38]. However, Manson J dismissed the motion. His key holding was that

[69] The Regulations, when viewed contextually and purposively, do not preclude successive dual NOAs in respect of the same patent, one alleging non-infringement and another alleging invalidity.

There are two branches to res judicata, namely cause of action estoppel and issue estoppel. Manson J held that neither of these was engaged.

Both branches require that the prior decision is final [42], [52]. Manson J noted that there is conflicting caselaw on whether a decision is final when there is a pending appeal, but he held that the weight of authority is to the effect that a decision is not final if an appeal is pending [48]–[51]. It was not disputed that the appeal in Janssen v Apotex 2022 FC 107 is pending, and consequently Manson J held that the matter is not res judicata [51], [53].

I must say that I don’t find the authorities relied on by Manson J to be strong support for his conclusion that a decision is not final if an appeal is pending. He quoted the statement in CUPE 2003 SCC 63 [46] that “[a] decision is final and binding on the parties only when all available reviews have been exhausted or abandoned.” But the thrust of that paragraph as a whole is that a party who is dissatisfied with a decision can attack it through an appeal or judicial review, but it is an abuse of process to attempt to impeach a decision in a different forum. This could just as well support the view that the only mechanism for attacking a decision is by way of appeal or judicial review. Manson J also relied on Lilly v Teva 2018 FCA 53 [83]. That case held that a decision was final even though there was no opportunity for appeal because the issue was moot. This is entirely consistent with saying that the only mechanism for attack is by way of appeal. In both these cases, the prior decision was held to be final. Finally, Manson J relied on Canada v MacDonald 2021 FCA 6 [15], in which Stratas JA remarked that “If an appeal is brought, the appeal court can interfere with the order or judgment. Thus, an order or judgment under appeal is not final for the purposes of the doctrine of res judicata.” Again, this is consistent with saying that the only mechanism for attack is by way of appeal. As I read it, Stratas JA was saying that taking an appeal is not precluded by res judicata, but this does not mean that it is not final for other purposes. Indeed, Stratas JA held that res judicata did apply to bar re-litigation on the facts [24] (albeit in obiter, as the matter was disposed of on other grounds [12]).

I am not saying that Manson J is necessarily wrong in his conclusion that a decision is not final for the purposes of res judicata if it is under appeal, but I would suggest that the point is not settled by the authorities he referred to. In my view, those cases stand primarily for the proposition that any attack on a decision other than by way of appeal or judicial review is an abuse of process.

While Manson J would have dismissed the issue estoppel argument on finality alone, he also found that the issue of infringement is not the same as the issue of validity, so that branch of the test for issue estoppel was not satisfied either [57]–[63]. For issue estoppel, it is not enough that the argument might have been raised; it must actually have been raised and decided (albeit possibly implicitly).

This left abuse of process, which is a supplementary doctrine that “has applied to bar needless litigation that may not meet the technicalities of issue estoppel or cause of action estoppel” [65]. There is no test as such for abuse of process, which turns on the court’s assessment of whether the proceedings are oppressive or vexatious: CUPE 2003 SCC 63 [35]–[43].

Janssen’s main argument was that:

[66] Apotex “testing a non-infringement allegation before alleging invalidity” constitutes an abuse of process. Janssen argues that allowing these actions to continue would lead to the absurd result that generic drug manufacturers could deliver one NOA making just one allegation, fully litigate that issue, only to then deliver another NOA with a fresh allegation in respect of the same patent and drug.

I must say that strikes me as a strong purposive argument. If the PM(NOC) system did not exist and a generic brought a declaratory action alleging non-infringement in order to “clear the way,” I think it would have to be an abuse of process to bring a second declaratory action alleging invalidity if the non-infringement action failed.

Now, this is not a declaratory action, so the text and context of the PM(NOC) Regulations are crucial [68]. Manson J stated that “Nowhere in the text of the Regulations does it state that a [generic] can serve only one NOA in respect of each patent” [70]. That’s true, but nether it say that multiple NOAs are permitted; the Regs simply do not directly address this situation. He continued “On the contrary, the Regulations require that an NOA is served on a patentee each time an allegation is made leading to, in some cases, successive NOAs and successive litigation” [70]. I’m not sure what examples he had in mind. To the extent that a generic serves successive NOAs because it is seeking ANDS for different products, that is clearly not an abuse of process, but in such a case the underlying facts are different, because the products are different, so res judicata or abuse of process is clearly not engaged. That is going on here.

Manson J relied heavily on the fact that allegations of invalidity and non-infringement are contemplated in different subparagraphs of the Regs, namely 5(2.1)(c)(ii) and (iv) [72]–[73]. I have difficulty reading as much into this as did Manson J. It looks to me like this paragraph is simply trying to set out an exhaustive list of allegations in a clear format. Manson J placed considerable emphasis on the fact that invalidity and non-infringement found in separate paragraphs, noting that

[72] There is, however, no such distinction between individual grounds of invalidity. If a generic drug manufacturer were attempting to serve a second NOA in order to pursue different grounds of invalidity it did not pursue in previous litigation that would almost certainly be abusive of the process set out under the Regulations.

This strikes me as being somewhat formalistic. Yes, they are in two separate paragraphs. But what function or purpose is served by allowing separate allegations of non-infringement and invalidity, while prohibiting separate allegations of different grounds of invalidity? Invalidity attacks are not generally more closely linked than validity and infringement; eg an attack based on patentable subject matter will have little evidence or argument related to an obviousness attack.

Janssen also relied on the statement in the 2017 RIAS that “[the amendments eliminate] the need for separate proceedings to address all claims in a single patent” [66]. Manson J dismissed this on the basis that “the new Regulations were implemented to avoid the dual track litigation that occurred under the old Regulations where limited issues of patent validity or infringement were addressed summarily via applications for prohibition orders under the Regulations, and then re-litigated as actions for infringement under the Patent Act” [75]. No doubt that was one specific objective of the new Regs, but the amendments were not limited to curing that problem: the RIAS states that “[a]s a general statement, the amendments seek to facilitate the just and expeditious resolution of patent infringement and validity disputes under the Regulations.” The need for an efficient and expeditious resolution of the disputes is emphasized throughout in a variety of contexts.

Moreover, the 2017 RIAS contemplates that non-infringement and invalidity will normally be litigated in the same proceeding. So, when the patentee brings an infringement action, “[i]n addition to defending such an action, a second person may commence a counterclaim seeking to invalidate the patent.” This is directly reflected in s 6(3)(a), which contemplates that when a patentee brings an action for infringement in respect to the NOA, the generic may respond with a validity attack. The RIAS also remarks that because the proceedings “will focus on underlying questions of patent validity and infringement” mootness is no longer an issue. The RIAS explains that “[n]on-infringement allegations need not be as detailed as invalidity allegations; a second person will be free to choose how detailed a non-infringement allegation may be. However, the second person is required to serve, along with its NOA, any portions of its submission or supplement that could be relevant for determining whether a listed patent would be infringed. The second person must comply with this requirement even if it makes no allegation of non-infringement.”

Overall, I would say that purposive and contextual factors relating to the desirability of promoting efficient and expeditious resolution of the proceedings weigh quite strongly against permitting separate allegations of invalidity and non-infringement. A sufficiently clear text will dominate purposive and contextual considerations, but the only textual point invoked by Manson J was that that invalidity and non-infringement allegations are mentioned in separate subparagraphs of 5(2.1)(c); this strikes me as a fairly weak textual point, which is not sufficiently clear to warrant an interpretation contrary to the purposive and contextual emphasis on streamlining the litigation process.

The issue will be slightly different if an appeal had been decided in the earlier proceeding, or if the time for taking an appeal had passed. If a generic argues non-infringement, and, for example, does not appeal, can it then allege invalidity in a new NOA? According to Manson J, doing so would not be an abuse of process, as nothing in his abuse of process analysis turns on the finality of the prior decision. This strikes me as counter-intuitive. Perhaps the answer is that in such a case cause of action estoppel might apply. In that scenario, the finality requirement would not be an obstacle, so the question would be whether an allegation in an NOA is a “cause of action.” The answer isn’t entirely clear, because strictly the cause of action is for infringement, brought by the patentee in response to the NOA. But given the emphasis in the 2017 amendments on efficient dispute resolution, I find it very difficult to believe that the generic would be permitted to file successive NOAs alleging that the patentee is not in fact the owner or licensee, then after losing in a final decision, and then another alleging invalidity, and another alleging that the patent at issue was not properly listed, and yet another alleging non-infringement. If that is not permitted if the prior decision is final, I find it difficult to see why it should be permitted simply because the prior decision is under appeal.

Misleading the Court as a Basis for Punitive Damages

Fromfroid SA v 1048547 Ontario Inc 2023 FC 925 Grammond J

2,301,753 / rapid cooling cells

This decision is of interest primarily for the award of punitive damages, granted because the infringer had intentionally infringed the patent rather than buying the patented system from the patentee in order to save money and then tried to cover up the infringement by presenting misleading evidence to the court [106]–[107]. As a matter of law, it is interesting that attempting to mislead the court was used as one factor—and for one defendant, the only factor—for awarding punitive damages, rather than sanctioning that conduct through elevated costs. There is precedent for this in the trademark context: see Chanel v Lam Chan Kee Co 2016 FC 987 [76] affd 2017 FCA 38 [11].

Fromfroid’s 753 patent relates to a cooling system for food products. The system consists of “a tunnel lined with tarpaulins that inflate with air blown by a fan. When they inflate, the tarpaulins press against the pallet of products to be refrigerated, which is placed in the centre of the tunnel. In so doing, they force the stream of cold air to pass between the containers of products instead of going around the pallet, which ensures more rapid cooling” [3]. The complete system consists of a number of “cells” each with its own fan.

The defendant 1048547 Ontario Inc dba Skotidakis, operates a dairy products business [6]. Skotidakis was interested in acquiring a cooling system for its dairy products. In 2014, Skotidakis obtained a trial cell from Geosaf, Fromfroid’s agent, for a period of about six weeks. Fromfroid then submitted a bid for a 24-cell system, but Skotidakis did not follow up [6]. In October of 2018, approximately three months after the 753 patent expired, a representative of Geosaf attended Skotidakis’s facilities in order to service unrelated equipment. The Geosaf representative saw and photographed a 24-cell cooling system that bore a strong resemblance to the patented system [7]. The only live issue at trial was whether the system was built before or after the expiry of the patents [10]. (There was a feeble attempt to argue non-infringement on the basis that the tarps did not press against the sides of the pallet, but Grammond J had no difficulty dismissing this on the facts [74]–[93].)

The difficulty for Fromfroid was that it had no direct evidence of when the system was built. Instead, it had to rely on indirect evidence, such as wear marks apparent in the photograph taken by the Geosaf representative and the difficulty of constructing a system in only 3 months [71].

Against this circumstantial evidence was the direct testimony of four persons, all more or less closely associated with Skotidakis, who stated that, “to their personal knowledge, the cells were built [in the three month period after expiry], particularly since this testimony is supported by documentary evidence” [49]. As counsel for the defendants put it, “[a]ccepting Fromfroid’s position would entail that these four witnesses lied to this Court and that the documents they submitted are forgeries” [49].

While Grammond J did not explicitly find that the witnesses lied or that the documents were forgeries, he did reject their evidence as being defensive and unresponsive [52], deliberately evasive [53], “implausible” [57] and imprecise [59]. He found that while the documents Skotidakis tendered in evidence “show no obvious signs of falsification, there is also no basis for excluding the possibility that they are forged, that the date on them could have been altered (e.g., by replacing ‘2016' with ‘2018') or that they refer to a different project” [61].

With little weight given to the defendants’ evidence, Grammond J found that the circumstantial evidence was sufficient to establish “a serious, precise and concordant presumption” (per CCQ Art 2849) that the cells were built before the 753 patent expired [71]. While Grammond J did not expressly find that the Skotidakis witnesseses had lied or that the documents were forged, he did find that “Skotidakis sought to conceal the infringement by presenting various pieces of evidence intended to mislead the Court as to the date the cells were made” [106].

Grammond J awarded lost profit damages on the basis that but for the infringement, Skotidakis would have purchased its system from Fromfroid [97]–[102].

He also awarded punitive damages, on the basis of two factors. First, he found that Skotidakis knew of the existence of the patent and infringed knowingly [105]. This alone would not be sufficient to justify punitive damages [105], but as an additional factor, Grammond J found that in attempting to mislead the Court, Skotidakis had engaged in “highly reprehensible misconduct” [106]. He stated that “the attempt to mislead this Court is serious and should be severely denounced” [109]. Accordingly, he ordered Skotidakis to pay $200,000 in punitive damages, on a top of $150k in compensatory damages [102], [111].

Grammond J also awarded punitive damages against the defendant, Frimasco, a construction company that had built the system on behalf of Skotidakis, even though Frimasco was not aware of the patent at the time it constructed the system [112]. The sole basis for awarding punitive damages against Frimasco was its role in concealing the infringement [112]. While Frimasco did not benefit directly from the infringement, “Skotidakis and Frimasco have a close and longstanding business relationship” [37]. Mr. Robert, the president of Frimasco at the time, gave implausible testimony relating to the purchase of parts for the system [36] and as to the construction speed [47], and as to the nature of the system when testifying regarding infringement [78]. Grammond J found that Frimasco’s “involvement in the cover-up is just as reprehensible as that of Skotidakis” [113]. (Note there are a couple of typos in paras [112], [113], where Grammond J refers to the patentee, Fromfroid, when he evidently intends to refer to the defendant Frimasco.)

It is interesting to see such conduct used as a factor—and in the case of Frimasco, the sole factor—supporting an award of punitive damages. I would have expected to see some kind of costs sanctions instead. But I’m not an expert in sanctions for giving misleading evidence or litigation misconduct generally. Chanel v Lam Chan Kee Co 2016 FC 987 [76] affd 2017 FCA 38 [11], cited by Grammond J at [106], does use attempts to mislead the court as a factor in awarding punitive damages (though in Chanel the attempt to mislead the court was only one of nine factors supporting the award of punitive damages). Further, it is established in Ontario law that litigation misconduct can be an independent actionable wrong that could give rise to punitive damages: McCabe v Roman Catholic Episcopal Corp 2019 ONCA 213 [43]–[48]. At the same time, litigation misconduct can also be sanctioned by costs: Render v ThyssenKrupp 2022 ONCA 310 [87]–[91]. Costs submissions remain to be made in this case [121]. It will be interesting to see if Grammond J takes the misconduct into account in awarding costs, or whether that would be considered double counting. Absent the award of punitive damages, I would be inclined to think that a very substantial costs award would be appropriate, well beyond 40% lump sum which is the higher end of the usual range, and approaching full indemnity. It is apparent from Grammond J’s reasons that Skotidakis did not have any good faith defence and should have settled rather than raising a defence premised on trying to mislead the court.

Does an Order to the Commissioner to Vary the Patent Office Records Engage the Limitations Period?

Secure Energy (Drilling Services) Inc v Canadian Energy Services LP 2023 FC 906 Zinn J

2,624,834 / Water-Based Polymer Drilling Fluid

This case raises a difficult question as to whether the limitations period in s 39(2) of the Federal Courts Act applies to a declaration of inventorship and consequent declaration of ownership. It also raises a subsidiary question as to whether a formal order directing the Commissioner to vary the records of the Patent Office is required when the court issues a declaration of ownership under s 52. For convenience, I will refer to the corporate parties’ predecessors by the name of the current parties, namely Canadian Energy Services (CES) and Secure; some arguments based on chain of title were raised, but these came to nothing: [78]–[83]. (CES’s predecessor was Mud King and Secure’s predecessors are Genesis, New West, Marquis, 1658774 Alta Inc.)

The 834 patent relates to drilling mud with anionic polymers as an anti-accretion additive to prevent the mud from sticking to the drilling components [2]. Ewanek, currently the named inventor on the 834 patent, worked for Secure. He hired Levey to work on anti-accretion additives [10]. In this decision, Zinn J found that it was in fact Levey alone who devised the anionic polymer additive which was the subject of the 834 patent [55]. In 2005, after Levey devised the anionic additive, Ewanek left Secure to work for CES [13]–[14]. CES then filed an application for what became the 834 patent, with Ewanek listed as the sole inventor. The 834 patent issued in 2016, with CES as the owner of record of the 834 patent and Ewanek as the sole inventor, which is the way the record stands as of the date of the decision. (It’s worth noting that Levey also devised a cationic polymer, which led to a separate patent 2,508,339, which issued to Secure; both Ewanek and Levey were named inventors on the 339 patent application, relating to the cationic polymer, but Ewanek’s name was subsequently removed: Secure v CES 2021 FC 1169 Zinn J discussed here.)

So, at heart, this was a case of contested inventorship, in which Zinn J found on the facts that Levey was the true sole inventor, and not Ewanek, who was listed as inventor on the record. This was the easy part. The finding that Levey was the true inventor was not a close call [42]–[54], and there was no real dispute that if Levey was the true inventor, then Secure as his employer was properly the owner, as Levey did not advance any personal claim to ownership [81].

The difficult issue related to the application of the limitations period. This was complicated by the procedural history. In Feb 2018 CES brought an infringement action against Secure in the Federal Court, based on the 834 patent,. Secure sought a stay on the basis that it would be commencing an action in the Alberta Court of Queen’s Bench seeking a declaration of ownership of the 834 patent; this was before SALT v Baker 2020 FCA 127 (see here), so both parties believed that the FC did not have jurisdiction to determine ownership [20]. This evidently alerted CES to the fact that Secure was going to defend on the basis of ownership, so in July 2018, CES commenced an action in the ABQB seeking a declaration that it was the owner of the 834 patent and that Secure had infringed. Secure defended and counterclaimed on the basis that it was the true owner or at least co-owner [18]–[19]. The FC action was stayed on consent until the Alta decision was received: [23].