Indefinite Hiatus

I started this blog in January of 2011. As a professor, it would have been easy to work only on projects that piqued my curiosity, but I didn’t want to write on topics of purely academic interest. By committing myself to commenting on every patent case, I wanted to force myself to learn every area of patent law that was of practical relevance. While I haven’t completely succeeded, I have certainly learned a great deal over the past thirteen years. I hope I have also provided a resource that has been useful to the profession.

While blogging has been rewarding in many ways, it has also taken up a great deal of my time. Consequently, I have decided to take an indefinite hiatus in order to pursue other projects (including trying to finish a patent law treatise that I have been working on for almost as long as I have been blogging). I won’t be blogging for at least a few months. If I do return to blogging, it will be with reduced frequency, perhaps focusing solely on FCA decisions, or on select issues of particular interest.

Thank you to all the readers who have made this blog a success over the past decade.

Trademarks Act 7(a) Unjustified Threats Claim Fails on Second Branch

Valley Blades Ltd v Usinage Pro-24 Inc (Nordik Blades) 2023 FC 1749 St-Louis J

2,856,940 2,965,426 2,992,233 / Segmented Snow Plow Blades

Valley Blades and Nordik Blades are direct competitors in the market for snowplow blades [206]. Valley Blades brought a declaratory action seeking to have Nordik’s 940 patent declared invalid, and Nordik responded with an action claiming that Valley Blades infringed Nordik’s 426 and 233 patents. The patents are all related — the 426 is a divisional of the 940 and the 233 is a divisional of the 426 [46] — and the actions were consolidated Patent [46]. The action was bifurcated and infringement was conceded [7].

St-Louis J found that all the asserted claims were obvious in a very straightforward decision which turned entirely on the facts [88]–[174]. A previous post discussed the two other validity attacks, based on overbreadth and wilful misleading. This post deals with Valley Blades claim under 7(a) of the Trademarks Act for damages for business lost as a result of demand letters sent by Nordik to Valley Blades’ clients. Unusually, in this case the claim was dismissed in part because the demand letter was found not to discredit Valley Blades wares, even though the allegations of infringement were in fact false.

Subsection 7(a) of the Trademarks Act provides that “No person shall make a false or misleading statement tending to discredit the business, goods or services of a competitor.” The essential elements of such an action are (a) a false or misleading statement; (b) tending to discredit the business, wares or services of a competitor; and (c) resulting damage: S&S Industries [1966] SCR 419, 424. As McHaffie J noted in Fluid Energy 2020 FC 81 [49], quoted at [233], “It has long been recognized that a false allegation that a competitor infringes a patent may fall within subsection 7(a). This is so even if the falsity of the allegation may not be established until later, such as after a finding that the patent is invalid.” S&S Industries was itself such a case.

There are five key cases, all dealing with communications to customers of a competitor alleging that the competitor’s product infringed the patentee’s patent. In S&S Industries [1966] SCR 419 the SCC held the patentee liable pursuant to 7(a) for losses after a trial holding the patent invalid. The central holding is that there is no requirement of malice, so that an action under 7(a) may be sustained even though the falsity of the allegation — that is, a finding that the patent is invalid — is not established until later. Then, in M&I Door Systems (1989), 25 CPR (3d) 477 (FCTD) 523–24 Cullen J found the patent at issue to be invalid, but dismissed a counterclaim based on 7(a) on the basis that the cease and desist letters were “more informative than threatening” and apparently also because the allegation of infringement was “sincerely believed.” Cullen J cited no authority for this distinction—indeed, he cited no authority at all, not even S&S Industries. He decision seems to to be at odds with S&S Industries, as discussed here. There is no certainly no basis for the distinction between threatening and informative letters in S&S Industries, and the reference to the patentee’s sincere belief is clearly inconsistent with the SCC decision.

The distinction between threatening and informative letters was then picked up by Hughes J in Supertek 2016 FC 986 [10]–[11] and Manson J in Excalibre Oil Tools 2016 FC 1279 [282] (discussed here), though in both cases the letters at issue were held to be threatening, so that the second branch of the test was satisfied: see here. (In Excalibre, Manson J held the patentee liable under 7(a), while in Supertek, Hughes J that the third branch of the test, causation, had not been satisfied: see here.) Most recently, in Fluid Energy 2020 FC 81, the defendant in an infringement action sought an interlocutory injunction prohibiting the patentee from sending cease and desist letters to its suppliers, on the basis that the letters were actionable under 7(a). As discussed here, McHaffie J undertook a through review of the relevant law, again picking up the distinction between informative and threatening letters by way of Manson J’s Supertek decision. On the facts, he found the letters to be threatening and granted the injunction.

At this point, the distinction between threatening and informative letters seems to be established, though it is difficult to reconcile with S&S Industries, and the only case to actually dismiss a 7(a) action on this basis is M&I Door Systems. As I’ve said in posts on Excalibre and Supertek, here and here, I am not a proponent of this distinction.

The problem is to balance two competing concerns. If the patent is invalid, it is wrong to allow the patentee to use a cease and desist letter to divert business away from a competitor. If the patentee does so, it is not obtaining any legitimate reward for innovation — if the patent is not valid, it has not delivered the quid pro quo of a new and useful invention. If the litigation system were perfect, the competitor could bring a declaratory action for invalidity as soon as the allegation was made, and have the patent instantaneously declared invalid. If the patent is invalid, the business gained by the patentee from its cease and desist letter is simply exploiting the delays inherent in a real world litigation system, while at the same time chilling the legitimate competition which is the lifeblood of a healthy economy.

On the other hand, if the patent is valid, the patentee is entitled to those sales, and the customers should made aware that they are exposing themselves to liability by purchasing potentially infringing goods. The problem is to try to balance the risk of illegitimate chilling of competition against the interest of both the patentee and the customers in the customer being made aware of the risk of infringement.

One approach is to hold the patentee liable for threatening letters but not for informative letters. This is appealing because delivering information about the potential for infringement is the socially beneficial aspect of the cease and desist letter.

However, this is not a satisfactory solution. If the patent is not valid and the letter diverts trade away from a legitimate non-infringing competitor, then the social harm arises, no matter how politely the letter is phrased. And any letter that conveys the necessary information — that the competitor’s product potentially infringes — will have a chilling effect, no matter how politely it is phrased. Any customer who consults a lawyer will be reacting to the prospect of a lawsuit, not to the tone of the letter.

As I have noted in previous posts, here and here, the problem of balancing these legitimate interests in the face of uncertainty over the merits is very similar to the problem faced by courts in granting an interlocutory injunction. In the context of an interlocutory injunction, if the injunction is granted and it ultimately turns out that the plaintiff’s rights are not vindicated, the plaintiff will be strictly liable on the undertaking for any loss to the defendant from having been enjoined for exercising what turn out to have been its legitimate rights.

In my view, the same solution should be adopted in this context. If the patent is ultimately determined to be invalid, a patentee should be strictly liable to its competitor for any lost sales caused by an allegation of infringement made known to a customer or other third party, which causes its competitor to lose sales, whether or not the allegation is made in good faith. Liability should not turn on whether the letter is phrased politely or aggressively, or whether the threat is direct or implicit. If the patentee is confident in the validity of its patent, it can go ahead and send the cease and desist letters to its competitor’s customers, secure in the knowledge that it will ultimately prevail. If it is less confident in the validity of its patent, it can refrain from sending such letters, and instead sue the competitor itself for infringement. If the patentee prevails in that lawsuit, it can get damages for the sales that it would have made. No doubt damages are not a perfect substitute for the sales themselves, but they are a reasonable substitute, and a patentee with a weak patent should not expect perfection. Confining a patentee with a weak patent to damages is surely worth it when the alternative is to allow the patentee to exploit the delays in the litigation system to extract unjustifiably high prices on the basis of an invalid patent.

With all that said, back to the case at hand.

Two statements were at issue. The second communication was a “Notice of patent infringement” sent to a number of Valley Blades’ customers after the patent was issued, threatening to sue “all entities who are purchasing or selling” infringing copies, ie the end-users themselves. In this context, St-Louis J discussed the distinction between informative and threatening letters [235]–[239]. She noted that it was unclear whether this distinction went to the first element (falsity) or second element (tending to discredit), but she in any event held that the Notice was threatening as it directly alleged infringement and threatened legal action [240]. She consequently held that both the first [240] and second elements of the test were satisfied [244]: the Notice was false, given that the patent was invalid, and discredited Valley Blades product by threatening infringement. This much is in line with the cases such as Excalibre and Supertek.

The first communication was a demand letter sent by Nordik to Valley Blades prior to the issuance of the patent, alleging that some of Valley Blades’ products were “exact copies” of Nordik’s product and would infringe the patent once granted [209]. This letter was also sent to one of Valley Blades major customers [209], with the intent of influencing that customer to buy Nordik’s product instead [218]. Ultimately the customer ordered from Nordik, even though Valley Blades offered a steep discount [219].

St-Louis J held this was not enough to establish Valley Blades’ claim under s 7(a). The first element was satisfied, as the statement was indeed false, given that an invalid patent cannot be infringed. But St-Louis J held that the second element was not satisfied. She held that there was “no evidence that Valley Blades’ clients have retained a bad impression of Valley Blades following Nordik Blades’ actions,” and “Valley Blades has not convinced me that the Demand Letter tended to discredit its product or business” [221].

St-Louis J’s analysis on this point was very brief — a single paragraph, after reviewing the facts [221] — and difficult to follow. She referenced the distinction between threatening and informative letters, but it is not clear what role, if any, it played in her reasoning. She found that the second branch was not satisfied because it was not established that the recipients had formed a “bad impression” of the product. This could be taken to imply that she has interpreted “disparagement” in 7(a) as requiring that the communication results in the recipient thinking less of the quality of the wares. If so, that is contrary to S&S Industries, which makes it clear that an allegation that the wares infringe a patent can “disparage” the wares, even without calling the technical merits of the goods into question. Moreover, I don’t see any substantial difference between the letters at issue in this case and those that were found to be threatening in Excalibre and Fluid Energy. Perhaps some distinction might be drawn, but none is immediately apparent, and St-Louis J did not attempt to draw any distinction. (Note that in Supertek the communications were oral.)

Damages

St-Louis also held that the third element, resulting damages, had not been established in respect of either the first or second communication.

In respect of the first communication, it was established that the letter was intended to induce the customer to buy Nordik’s product instead of Valley Blades’ product [218], and the customer did indeed purchase Nordik’s product, even though Valley Blades offered a steep discount [219] for a product which Nordik itself stated was a “copy” of Nordik’s product. This did not satisfy St-Louis J that there was a causal link between the letter and the decision to purchase Nordik’s product. This strikes me as an extraordinarily high evidentiary bar.

On the second communication, after receiving the Notice, one of Valley Blades customers returned a product that it had already received — the EconoFlex-M blades — in order to avoid any litigation risk [245]–[246]. However, Nordik argued that Valley Blades had not lost business because Township had accepted a substitute Valley Blades product. In light of this, St-Louis J held that she was not persuaded that Valley Blades had established damages. As discussed here, I am inclined to think that substantial damages should not be an element in the tort itself. In this case, it is clear that Valley Blades had to stop selling one product, and that should be enough. The quantum of the harm should be left to damages inquiry, rather than being used as a substantive threshold. That is particularly important when the harm is prospective, because if substantial damages are an element of the tort, an injunction cannot be granted. That is why the better view is that only potential damage is required, as Manson J noted in Excalibre [286].

Obviousness Attack Succeeds: Overbreadth and Wilful Misleading Fail

Valley Blades Ltd v Usinage Pro-24 Inc (Nordik Blades) 2023 FC 1749 St-Louis J

2,856,940 2,965,426 2,992,233 / Segmented Snow Plow Blades

Valley Blades and Nordik Blades are direct competitors in the market for snowplow blades [206]. Valley Blades brought a declaratory action seeking to have Nordik’s 940 patent declared invalid, and Nordik responded with an action claiming that Valley Blades infringed Nordik’s 426 and 233 patents. The patents are all related — the 426 is a divisional of the 940 and the 233 is a divisional of the 426 [46] — and the actions were consolidated Patent [46]. The action was bifurcated and infringement was conceded [7].

St-Louis J found that all the asserted claims were obvious in a very straightforward decision which turned entirely on the facts [88]–[174]. Indeed, that part of the decision was so straightforward that I won’t bother to summarize it. This post will deal with the two other validity attacks, while a subsequent post will address the defendant’s claim under the Trademarks Act s 7(a) for damages for business lost as a result of demand letters sent by Nordik to Valley Blades’ clients.

Overbreath

The first of the other validity attacks was based on overbreadth. In a two part article I have argued that the overbreadth requirement is almost always redundant: Overbreadth in Canadian Patent Law, 33 IPJ 21 and 33 IPJ 147. But the FCA in Seedlings 2021 FCA 154 [50], held that overbreadth is indeed an independent ground of invalidity, and since then parties attacking the patent have been trying to find a way to use overbreadth to launch novel attacks on the patent, so far without success.

In this case, St-Louis J summarized the law of overbreadth as follows:

[175] The law of overbreadth is rooted in the patent bargain; an inventor shall not reap the benefits of an expanded monopoly without a corresponding sufficient disclosure to the public (Seedlings Life Science Ventures, LLC v Pfizer Canada ULC, 2020 FC 1 at para 167).

[178] To identify whether an element goes to the “core of the invention,” the Court ought to consider whether implementing the invention without those elements would require inventive ingenuity (Seedlings FCA at para 63).

This is a fair summary of those decisions, but it is also a fair summary of the sufficiency requirement.

On the facts, Valley Blades argued that the claims at issue were “broader than the invention actually made by [the inventor]. It argues this is because the tapered shape of the Nordik Blades’ blades is not claimed in any of the Disputed Claims” [180]. Valley Blades relied on the inventor’s evidence: “during his examination for discovery in July 2020, [the inventor] was clear that he considered the shape of the Nordik Blades’ blades to be a part of his purported invention” [181]. This passage suggests that Valley Blades was arguing that “the invention” is what the inventor subjectively believed the invention to be. This is an outlandish argument. In the first place, the inventor very often does not know their true invention, because the inventor is not always aware of the complete prior art and so is not necessarily aware of their true contribution. Second, even if the inventor did have a more advanced invention in their head, how can that invalidate the patent they actually were granted? If Sargon invented the wheel, but the idea of a spoked wheel passed through his mind, a patent on the wheel would still be valid. That would be true whether he thought of the spoked wheel either before or after he filed his application for the wheel. It would also be true if he had said to a friend, “My invention is the spoked wheel” after filing his patent; and the same would be true if he had said that before filing the patent.

In response Nordik argued that “nothing demonstrates that the tapered shape is an essential element for the invention to work as claimed in the Nordik Patents” [186]. This seems to be saying that the patent was not overbroad because the claimed invention had utility even without the tapered shape. On this view, overbreadth seems to be a lack of utility argument in a different guise, which, as I explain in my article, is often the case. St-Louis J accepted Nordik’s position, saying “when I factor in all the evidence, I am not convinced on balance that the blades’ tapered shape was an omitted essential element of the invention and that the claims are invalid for claiming more than the invention that was made” [188].

Section 53 Wilful misleading

Valley Blades argued that the patents were invalid for wilful misleading under s 53(1) because some statements in the specifications exaggerated the benefits of the invention [192]. St-Louis J had no difficulty dismissing this attack. She noted that the threshold for establishing wilful misleading is high, and “even assuming that Nordik Blades somehow exaggerated the blade movement, the system’s efficiency, and the blade’s wear-and-tear, I find nothing amounts to the required threshold for statements violating section 53" [197].

In making this argument, Valley Blades relied on Ratiopharm v Pfizer 2009 FC 711, which St-Louis J distinguished on the basis that “the misstatements referred to in Ratiopharm appear considerably more serious—particularly as they relate to pharmaceutical products—than what has been raised against Nordik Blades” [197]. I’d also point out that the FC decision in Ratiopharm is not good authority in any event. While the decision was affirmed on appeal, the s 53 analysis was not. In Ratiopharm 2010 FCA 204 noted that:

[34] Pfizer expressed concern that the trial judge’s determination pursuant to subsection 53(1) of the Act was based on an overly broad interpretation of that subsection. I am of the view that the determination is confined to the unique and particular circumstances of this matter. It has limited, if any, value as a precedent.

Is a Patent Insufficient If it Requires a Minor Research Project to Practice?

Takeda Canada Inc v Apotex Inc 2024 FC 106 Furlanetto J

2,570,916 / dexlansoprazole / DEXILANT / NOC

As discussed in my last post, the patent at issue in this case related to a “pulsatile” dosage form of proton pump inhibitors (PPIs) comprising a PPI with “a first and a second dose,” which are released from the dosage form as “discrete pulses,” resulting in specified blood plasma concentrations [90], [92]. Takeda’s DEXILANT product is a pulsatile release formulation of the claimed type, which includes two types of delayed-release beads containing dexlansoprazole [6]. Apotex sought to sell a dexlansoprazole oral dose capsule product and Takeda brought this NOC action in response [2]. As discussed in my last post, Furlanetto J held that Takeda had not established infringement. That aspect of her decision was entirely straightforward, and would have been sufficient to dismiss the action [148]. Furlanetto J nonetheless went on to address Apotex’s validity arguments, “which formed a significant portion of the parties’ arguments at trial” [148]. The last post discussed the novelty argument. This post deals with the remaining validity issues. It raises the thorny issue of whether the factual basis for a sound prediction must be disclosed in the patent; I review the debate, though in the end this decision adds nothing new, as the point was not contested. The other interesting issue is the treatment of sufficiency, which strikes me as problematic in apparently requiring a patentee to disclose in the patent the amount of active ingredient necessary for clinical efficacy.

Obviousness

There is nothing notable in the obviousness analysis, but a brief description is useful in understanding the utility argument. While pulsatile dosage forms were known in the prior art for dealing with the breakthrough effect, there were some differences between the prior art and the asserted claims: in particular, the asserted claims specified the plasma concentrations needed to prevent breakthrough [209] and also required the second dose to be larger, to compensate for reduced absorption in the lower digestive tract [213]–[215]. Furlanetto J held that these differences would not have been obvious, in an analysis that turned on the facts [217]–[227].

Utility

Furlanetto J stated that “where the utility is founded on a sound prediction, the factual basis for the prediction must be set out in the patent disclosure” to the extent it is not based on the CGK [231]. Whether the factual basis for a sound prediction needs to be disclosed in the patent is a long running debate seeming from an enigmatic statement in Wellcome / AZT 2002 SCC 77 [70]:

Thirdly, there must be proper disclosure. Normally, it is sufficient if the specification provides a full, clear and exact description of the nature of the invention and the manner in which it can be practised. . . . In this sort of case, however, the sound prediction is to some extent the quid pro quo the applicant offers in exchange for the patent monopoly. Precise disclosure requirements in this regard do not arise for decision in this case because both the underlying facts (the test data) and the line of reasoning (the chain terminator effect) were in fact disclosed, and disclosure in this respect did not become an issue between the parties. I therefore say no more about it.

The Federal Courts initially understood this as requiring only the standard disclosure of how to make and use the invention: see eg Aventis Pharma v Apotex 2006 FCA 64 [28]–[35] affg 2005 FC 1283 [178]–[254]. Then, in Raloxifene 2008 FC 142 [164] affd 2009 FCA 97 [15], Hughes J interpreted this paragraph of Wellcome / AZT as requiring disclosure of the factual basis for the sound prediction in the patent itself. (There’s also a separate issue as to what is meant by “this sort of case”: see AstraZeneca FC 2014 FC 638 [141], discussed here.)

There are two main problems with this. First, the factual basis for sound prediction was not disclosed in the patent in the leading cases: see my post “The underlying facts were NOT in fact disclosed,” showing that the factual basis for the sound prediction was not disclosed in Wellcome / AZT itself; and see my comments to that post showing that the factual basis was not disclosed in Olin Mathieson [1970] RPC 157 (Ch) either, which Wellcome / AZT [60] identified as the case which gave “serious shape and substance” to the doctrine. Second, it seems clear that there is no duty to disclose the factual basis for demonstrated utility in the patent. (Initially it was entirely clear that there was no such duty, but after the enhanced disclosure requirement was advanced for sound prediction, there have been some hints that there is an enhanced disclosure requirements for demonstrated utility as well.) There is only one utility requirement in the Act, and it is often a very fine line between demonstrated utility and sound prediction — the difference will turn on exactly how much data has been collected. So, if the facts A, B, C and D are enough to demonstrate utility, but the facts A, B & C are only enough to establish a sound prediction, if the applicant is in possession of the facts A, B, C and D, it will not need to disclose any of them, but if the applicant is only in possession of the facts the facts A, B & C, they will need to be disclosed. It is difficult to see any rationale for this distinction. The only rationale that has been provided for the heightened disclosure requirement for sound prediction is the statement in Wellcome / AZT [70] that “the sound prediction is to some extent the quid pro quo the applicant offers in exchange for the patent monopoly.” This statement is completely opaque, which is entirely understandable, given that it was expressly obiter. As a result, it is not clear what the rationale is for a heightened disclosure requirement for sound prediction; and it is double unclear as to what the rationale might be for distinguishing the disclosure requirement in a case of sound prediction from that when utility is demonstrated.

In this case, the parties evidently accepted that the factual basis must be disclosed in the patent, as Furlanetto J did not indicate that her statement at [231] was disputed. I’m not convinced that the the point is settled. Furlanetto J relied on Eurocopter 2013 FCA 219 [153], Apotex v Allergan 2015 FCA 137 [9] and Pharmascience v Teva 2022 FCA 2 [5]. Eurocoper says only that disclousre of the factual basis “may” be required and Apotex v Allergan merely paraphrased this in a brief decision affirming the decision below on the facts. Pharmascience v Teva 2022 FCA 2 is more directly on point, but even there Locke JA’s remarks are ambiguous, as discussed here. Since the parties did not dispute the point, this decision doesn’t add any authority to the debate. The issue will eventually have to be clarified by the FCA.

Given that position, the question was whether two examples provided a sufficient factual basis for a sound prediction of utility. The parties agreed that the requisite utility was simply “to give a pharmacological effect (i.e., as agreed by the parties in this context, an effect on gastric acid pH)” [233]. Furlanetto J found that a scintilla of utility had not been established on the facts [248], apparently because “the effect of a pulsatile release dosage form on gastric pH could not have been predicted” [244].

I have to admit, I find this very suprising. It is very well known that PPIs are effective in treating GI issues, at least when given in a large enough dose to meet threshold blood plasma levels. Claim 11, which was one of the assserted claims [2], specifies blood plasma levels of at least 450 ng/ml, which I take it is well over the threshold. Presumably if this concentration were achieved with a single dose, it would be effective. I find it very difficult to understand how it makes any difference if the same plasma level is achieved with pulsatile dose. But I have to admit that I couldn’t really follow the technical evidence reviewed by Furlanetto J, and anyway, it is a finding on the evidence.

Sufficiency

Furlanetto J held the disclosure was insufficient for two reasons.

[258] First, Example 1 does not provide sufficient information for the PSA to understand how the inventors arrived at the oral dosage data and steady state plasma concentrations in the patent. As highlighted earlier and explained by Dr. Davies, the experimentation said to underlie Example 1 yielded modelled results that would be known to the PSA to be significantly lower than actual steady state plasma concentration values. Further, the data was from an IV study alone at one time point and did not include the subsequent oral dosage modelling data that was necessary for the inventors to translate the results of the modelling to threshold concentrations for a pulsatile release oral dosage form to be used over a 24 hour time period.

I find this passage a bit difficult to understand. The second sentence suggests that the problem is that the data is misleading. If that is the issue, Takeda was right in saying that this was a disguised s 53 attack [260]. Alternatively, Furlanetto J might be saying that the defect was simply the failure to disclosure how the inventors “arrived at the oral dosage data and steady state plasma concentrations.” This seems to be saying that the inventors must disclose in the patent the experiments and reasoning process that led them to arrive at their invention. If that is what was meant, it is not correct. As it happens, this point was addressed by Manson J in his very recent decision in Proslide v WhiteWater 2024 FC 175, in which WhiteWater argued that “the key principle” of the law of sufficiency is that “information known by the patentee may be considered in assessing whether the disclosure is sufficient,” and that “[f]acts known by the inventor, and intentionally omitted or not communicated in the description of a patent can result in disclosure being insufficient”. Manson J rejected this argument, encapsulating the established law of sufficiency as follows:

[19] WhiteWater’s position broadens the scope of sufficient disclosure beyond what the law actually supports. Section 27(3) of the Patent Act, RSC, 1985, c P-4, requires the patent to make a full disclosure, but that requirement pertains to “the invention and its operation or use as contemplated by the inventor” in the patent. Therefore, the extent of the obligation to make sufficient disclosure is limited in two ways. First, the information need only pertain to the invention as disclosed and claimed by the patent. Second, that information must enable the skilled person to make or use that invention (Teva at paras 50-52, 70). Further disclosure is not necessary to meet the requirements of sufficiency as contemplated by section 27(3).

On the whole, I suspect that what Furlanetto J was really getting at in this paragraph was similar to her second point, which is easier to understand, so I’ll turn to that.

The second point turned on the fact that the patent claims a dosage form containing an amount of PPI that results in a specified plasma concentration, but it does not disclose the amount of the PPI that is required to achieve that concentration. The amount of PPI required to achieve the specified plasma levels would depend on a variety of factors, such as the exact dosage form, as the excipients can affect absorption [263]–[264]. Consequently, determining the exact amount of PPI to achieve the specified levels would require a non-trivial amount of routine research, albeit not rising to the level of invention.

Furlanetto J cited Idenix v Gilead 2017 FCA 161 [19] for the proposition that “[a] disclosure is insufficient if it necessitates the working out of a problem,” and Seedlings 2021 FCA 154 [68], Leo Pharma 2017 FCA 50 [59] and Teva 2012 SCC 60 [75] for the proposition that “a minor research project is too much,” though some non-inventive trial and error experimentation may be permitted [257]. Applying this threshold to the facts, she held on the facts that the effort requires was too much [268].

This is problematic. Novel drugs are often patented very early in the R&D process, often on the basis of in vitro tests only, at a point where identifying the actual dose and dosage form necessary for clinical efficacy is a very long way off. This is typically true when utility is based on a sound prediction, and is often true even when utility has been demonstrated. While the patent will typically state the quantity needed, this is normally little more than guesswork. For example, in ZYTIGA 2021 FCA 45, concerning the 2,661,422 patent, which related to a combination of abiraterone acetate & prednisone for treating prostate cancer (discussed here), the specification stated that the amount to be administered was “about 0.01 mg/kg/day to about 100 mg/kg/day of abiraterone acetate” — a range of four orders of magnitude, and that for a compound that was already known. Similarly, in Rosiglitazone 2011 FC 239 (discussed here), the specification stated that the unit dose “normally contain an amount of the active ingredient in the range of from 0.1 to 1000 mg.” In HGS v Lilly [2011] UKSC 51, concerning EP(UK)0,939,804, relating to neutrokine alpha and related anitbodies, the specification stated that “[0125] As a general proposition, the total pharmaceutically effective amount of Neutrokine-α polypeptide administered parenterally per dose will be in the range of about 1 µg/kg/day to 10 mg/kg/day of patient body weight, although, as noted above, this will be subject to therapeutic discretion.”

It might be suggested that this case is different because the claims specified the requisite blood plasma concentration of the active ingredient and determining this concentration was part of the inventive concept. But sufficiency requires that the patentee disclose how to use the invention. Even when the plasma concentration is not specified, the skilled person still has to be able to practice the invention by determining an effective amount of the drug, so this doesn’t seem to be a difference in principle. A patent is sufficient if some trial and error is needed to find the clinically effective dose when a new compound is claimed, and the trial and error needed to find the dose needed to find the plasma concentration in this cases seems to be of the same nature, and if anything less extensive, given that the desired concentration is specified. But maybe there is more to this point that I am not seeing.

In coming to her conclusion, Furlanetto J relied primarily on the SCC Teva decision [267], which invalidated the patent for requiring what the decision repeatedly referred to as a “minor research project.” More specifically, and crucially, in Teva the skilled person would have to “undertake a minor research project to determine what the true invention was” [75] (my emphasis). This reference to determining the “true invention” was repeated consistently, in all the SCC’s references to a “minor research project”: see [17], [74], [75]. The issue in Teva was that the patent disclosed that one of the especially preferred compounds had been tested in humans and found to be effective, but the patent did not disclose which one. It was the failure to disclose which compound had been tested that constituted the failure to disclose “the true invention.” As the SCC noted in Teva, the trial judge felt that requiring the skilled person to undertake “a minor research project in order to determine which of the claims describes the true invention. . . plays games with the reader.” And as the FCA noted in Leo Pharma, the issue in Teva was that “the patentee had deliberately omitted essential information, thereby obscuring the fact that only one of the compounds claimed actually worked. Thus, the invention itself was not even properly disclosed” [58]. (See also Proslide [26], to the same effect.)

Thus the disclosure requirement at issue in Teva was not about disclosure of how to make the invention, it was disclosure of “the true invention.” And as the FCA pointed out in BRP v Arctic Cat 2018 FCA 172 [78], “[e]nablement (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 [Teva].” In this case there was no suggestion that Takeda had tried to conceal the true invention. The disclosure requirement at issue in this case was not disclosure of the true invention, but standard enablement, or how to practice the invention. And as the FCA further pointed out in Leo Pharma [58]–[59] and in BRP v Arctic Cat [78], the SCC in Teva did not change the traditional standard for sufficiency of disclosure of how to make the invention. In BRP v Arctic Cat [78], the FCA held that it was an error of law to apply the Teva standard for disclosure of the invention to the completely distinct context of enablement. With respect, it appears that Furlanetto J may have made that error in this case.

With all that said, I would return to the s 53 point. If Takeda actually knew the amount of active ingredient necessary to achieve the specified plasma concentrations and failed to disclose it, it is possible that there might be some kind of wilful misleading argument to be made. I don’t want to explore this further since it wasn’t at issue; the point is simply that a s 53 objection should be dealt with under s 53, and not by a strained interpretation of the sufficiency requirement.

Claims Broader

Apotex argued that the claims were overbroad “because the work of the inventors established that at least 1 hour was required between the pulsed doses; however, this 1 hour was not claimed” [270]. This seems to be redundant with utility, but in any event, it failed on the facts [274].

Ambiguity

A weak ambiguity attack also failed on the facts: [275]–[279].

Tension in the Sanofi Disclosure Analysis

Takeda Canada Inc v Apotex Inc 2024 FC 106 Furlanetto J

2,570,916 / dexlansoprazole / DEXILANT / NOC

Proton pump inhibitors (PPIs) are a class of compounds that decrease gastric acid level in the stomach [5]. PPIs are now a well-established treatment for GI disorders related to increased gastric acid [7]. It is desirable to have a once daily dosing regimen, but the formulations known at the time of the patent could result in nocturnal breakthrough events if used on a once-daily basis, resulting increased gastric acid production [12]. Takeda’s 916 patent aimed to address this problem with a “pulsatile” release formulation, comprising a PPI with “a first and a second dose,” which are released from the dosage form as “discrete pulses,” resulting in specified blood plasma concentrations [90], [92]. Takeda’s DEXILANT product is a pulsatile release formulation of the claimed type, which includes two types of delayed-release beads containing dexlansoprazole [6]. Apotex sought to sell a dexlansoprazole oral dose capsule product and Takeda brought this NOC action in response [2].

Furlanetto J addressed three claim construction issues, which all turned on the evidence. One question in particular turned on the meaning of “a first and a second dose” in the claims. Apotex argued that this means distinct amounts of PPI in the dosage form itself [97], as with the two types of delayed-release beads in DEXILANT. Takeda argued that the reference to two doses was not the amount of PPI in the formulation, but the amount of PPI released from the formulation [97]. In other words Takeda argued that even if there was only one form of PPI in the product, if it was released in two waves resulting in two distinct blood plasma peaks, that would fall within the claims. Furlanetto J accepted Apotex’s construction, for reasons that strike me as being straightforward and compelling [98]–[104]. (Her conclusions on the other two claim construction issues also strike me as being sound.)

In light of that construction, Apotex prevailed on infringement because it does not contain two different types of dexlansoprazole: “Characteristic of a single continuous, delayed release dosage form, each of the mini-tablets in the Apotex Product are identical” [119]. There was also an extended discussion of various labs tests which was a bit difficult to follow because of redactions. My impression is that Takeda was arguing that if you squint really hard, you can see two peaks in the plasma concentration curves. In any event, in the end Furlanetto J held that Apotex’s product would not infringe as Takeda failed to established that Apotex’s product comprised a first and a second dose of dexlansoprazole from the dosage form as two discrete pulses: “Rather, the evidence indicates that there is only one dose of dexlansoprazole in each 30 mg or 60 mg capsule of the Apotex Product that is released from the Apotex Product in a single, continuous delayed release fashion” [147].

To this point, the decision turned on the facts with no novel points of law. The conclusion on claim construction and infringement would have been sufficient to dismiss the action [148]. Furlanetto J nonetheless went on to address Apotex’s validity arguments, “which formed a significant portion of the parties’ arguments at trial” [148].

Anticipation

The anticipation argument raised a tricky point which turns ultimately on a tension in Sanofi 2008 SCC 61.

The focus was solely on the disclosure branch of the two part test for anticipation [151]. The key piece of prior art was Application 2,499,574, and in particular Example 57 which “provides a formulation that is close to DEXILANT® except that it includes the excipient PEG as part of the formulation” [168]. Apotex introduced evidence that the PEG would not affect the pharmacokinetics and that the blood plasma reached would exceed the threshold specified in the claims [169]–[170]. Furlanetto J held that Example 57 did not anticipate because “the heart of the invention of the 916 Patent is the recognition of the threshold plasma concentration and how to achieve and maintain it,” and “There was no suggestion in the 574 Application of any recognition of these properties, nor of their significance” [176]. Moreover, Example 57 did not disclose the blood plasma concentrations that would result, and for that to be determined, the capsules of example 57 would have had to be administered to humans and the PK properties would have to be identified and studied” [176]. It is not entirely clear to me if Example 57 comprised two different types of granules (see [202], suggesting it did), but it is clear that Example 11 did have two types [161], and Furlanetto J held that Example 11 did not anticipate because, inter alia, “there was no disclosure of any plasma concentration being a threshold which must be surpassed for pharmacological effect” [166].

So, Furlanetto J is saying that these examples did not anticipate because they did not disclose the properties of the compound described in the examples. This is contrary to the basic rule that “what infringes if later, anticipates if earlier”: Consolboard [1981] 1 SCR 504, 534. There is no requirement that anyone at the time would know of all the properties. As Lord Hoffmann said in Synthon [2005] UKHL 59 [22], in a passage quoted with approval in Sanofi 2008 SCC 61 [25], “whether or not it would be apparent to anyone at the time, whenever subject matter described in the prior disclosure is capable of being performed and is such that, if performed, it must result in the patent being infringed, the disclosure condition is satisfied.” So, if a pharmaceutical company were to market a pill that in fact had two types of PPI and resulted in plasma concentrations that were in fact above the specified thresholds, that pill would infringe if sold after the patent issued, regardless of whether anyone had measured the plasma concentrations prior to litigation. By the same token, such a pill would anticipate if sold prior to the date of the patent, also regardless of whether anyone had ever measured the plasma levels. As Lord Hoffmann explained in Merrell Dow [1995] UKHL 14 [47], “whether or not a person is working a product invention is an objective fact independent of what he knows or thinks about what he is doing”; similarly in Synthon [2005] UKHL 59 [22], quoting Merrell Dow, Lord Hoffmann noted that “[t]he flag has been planted, even though the author or maker of the prior art was not aware that he was doing so.”

All of this is settled law, with Sanofi as the leading case, and indeed, it was expressly recognized as such by Furlanetto J [153]. Why then did she hold that the plasma concentrations had to be disclosed in order to anticipate? The problem lies in Sanofi itself. The quotes from Sanofi that I have given above are all from the discussion of general principles relating to anticipation. When the SCC in Sanofi discussed the disclosure requirement in particular, and in applying those principles to the facts, the SCC did indeed imply that the properties have to be disclosed in order to anticipate.

Recall that the question in Sanofi was whether the prior art disclosure of the racemate anticipated the claim to the enantiomer. The answer was no. But why? Under the general principles set out in Sanofi, the answer would have been that making the racemate would not infringe a claim to the enantiomer, and so the test that “the matter relied upon as prior art must disclose subject-matter which, if performed, would necessarily result in an infringement of the patent” (Sanofi [25], quoting Synthon [2005] UKHL 59 [22]) would not be satisfied. More broadly, the question in Sanofi was framed as being whether disclosure of the genus can anticipate the species. The answer is no, because someone practising the genus would not inevitably infringe, as the genus might be practised without infringing, by selecting another species from the pool: see Sanofi [21].

But while that answer would have been straightforward on the general principles set out in Sanofi, the SCC changed its approach when it came to the discussion of the disclosure requirement specifically. The SCC said:

[31] Section 27(1) of the Act requires as a condition for obtaining a patent that the invention was not “known or used” and was not “described” in any patent or any publication more than two years before the patent application was filed. In the context of genus and selection patents, in E. I. Du Pont de Nemours & Co. (Witsiepe’s) Application, [1982] F.S.R. 303 (H.L.), Lord Wilberforce stated, at p. 311:

It is the absence of the discovery of the special advantages, as well as the fact of non-making, that makes it possible for such persons to make an invention related to a member of the class.

The compound made for the selection patent was only soundly predicted at the time of the genus patent. It was not made and its special advantages were not known. It is for those reasons that a patent should not be denied to the inventor who made and discovered the special advantages of the selection compound for the first time.

This is all true, but it runs together anticipation and obviousness.

The general point of Witsiepe’s Application is that a species may be patented over the genus. It is now understood that two separate hurdles must be overcome. The prior art disclosing the genus must not have specifically disclosed the species, or it will be anticipated. This is true even if it turns out that the species had special properties that were not appreciated in the prior art. Suppose that the genus patent specifically disclosed five especially preferred compounds by structure, and disclosed in vitro tests showing they were all effective in treating a disease. One of those, the lead compound, was commercialized and sold. It would not be possible to get a subsequent species patent on that compound, even if it was subsequently discovered, surprisingly and unexpectedly, that it had no side effects at all, while every other known member of the genus had significant side effects. That would be true even if no one had known that this was the only compound with no side effects (perhaps because the lead compound was the only one which was commercialized and the others had never been tested in humans). The same is true if the especially preferred compound had not been commercialized, but merely specifically disclosed, as there is no difference in principle between prior sale and prior publication. (If it were surprisingly and unexpectedly discovered that the compound was useful in treating an entirely different disease, it would be possible to get a patent on the use to treat that disease. That is not because the prior art must disclose the properties to anticipate; it is because making and using the compound for uses known in the prior art would not infringe the new use patent.) On the other hand, even if the species was not specifically disclosed, it must also have special properties. There is no “invention” in picking one member of the genus at random and finding that it has exactly the same properties as all the other known members. If it does not have special properties, it will be obvious, even if it is not specifically disclosed.

The quoted passage from Witsiepe’s Application’s runs these together: “It is the absence of the discovery of the special advantages [non-obviousness], as well as the fact of non-making [anticipation], that makes it possible for such persons to make an invention [new, useful and non-obvious subject matter] related to a member of the class.” And the following sentence from the SCC is to the same effect: “It was not made [not anticipated] and its special advantages were not known [not obvious].” It is true that both of these requirements must be satisfied for a selection patent to be valid. The problem is that in the heading to that section — “i. Disclosure” — and in the following paragraph, the SCC in Sanofi identified both of these separate requirements with the disclosure branch of anticipation:

[32] Where there is no such disclosure [of the special advantages], there is no discovery of the special advantages of the selection patent as compared to the genus patent, and the disclosure requirement to prove anticipation fails.

The SCC also ran obviousness and anticipation together in dealing with the disclosure requirement when applying the law to the facts. The special properties of the enantiomer were better activity and lower toxicity. The SCC said there was no anticipation because “[t]here was no evidence that the person skilled in the art would know from reading the [prior art genus patent] that the more active dextro-rotatory isomer would be less toxic than the racemate or levo-rotatory isomer or any of the other compounds made and tested” [40] and “[s]ince the ‘875 patent did not disclose the special advantages of the dextro-rotatory isomer and of its bisulfate salt, as compared to the levo-rotatory isomer or the racemate and their salts, or the other compounds made and tested or otherwise referred to in the ‘875 patent, the invention of the ‘777 patent cannot be said to have been disclosed” [41]. The approach set out on the facts in Sanofi was picked up in comments in Novo Nordisk 2010 FC 746 [170]–[174] and in Allergan 2022 FC 260, which were relied on by Takeda and quoted by Furlanetto J at [174], [175].

So, the reason that Furlanetto J’s analysis of disclosure in this case was inconsistent with the general test set out in Sanofi, is that the SCC’s analysis of disclosure in Sanofi was also inconsistent with the general test that it had just set out. The reason for this internal inconsistency in Sanofi is that it was a selection patent case. When the SCC addressed the broad principles of anticipation, it relied on the leading cases on anticipation generally. But when it got to the specifics, it turned to cases on selection patents specifically, which run anticipation and obviousness together.

I can’t fault Furlanetto J for following the SCC’s lead. But this case illustrates the problem with the view that the special properties must be disclosed in order to anticipate. The focus on disclosure of the properties didn’t make any difference in Sanofi itself because the enantiomers were not specifically described in the prior art in any event. But in this case, the focus on the properties may have made the difference. Because Furlanetto J held that the claims were not anticipated because the plasma concentrations were not disclosed, it is not entirely clear to me whether she would have held them to be anticipated on the “what infringes if later, anticipates if earlier” test. So suppose that the prior art did indeed disclose a formulation that would indeed infringe, so that the claims would be anticipated on that test. In particular, suppose that even though the plasma levels were not disclosed, the formulation disclosed in the prior art would in fact result in clinically effective plasma levels, exceeding the threshold set out in the claims. And since there is no difference between a prior publication and prior practice, suppose that the prior patentee had marketed its product to thousands of patients, who had taken it to successfully treat their GI disorders, all without measuring the plasma levels. Would the 916 patent be valid, so that the prior manufacturer would have to withdraw its product and turn the market over to Takeda? That can’t be.

The Junk Folder Ate my Patent

Taillefer v Canada (Attorney General) 2024 FC 259 Furlanetto J

2,690,767 / Wide Ice Resurfacing Machine

A patentee must pay annual maintenance fees to maintain its patent in effect: s 46(1). If the annual fee is not paid in time, the patentee has a six month grace period during which it can pay the maintenance fee plus a late fee: s 46(2). If the fees are not paid during the grace period, the patent will lapse: s 46(4). However, the patent can be reinstated on request if the Commissioner determines that the failure occurred in spite of “the due care required by the circumstances having been taken”: s 46(5). This case discusses what “due care” looks like in the context of email communications.

The patentee’s arrangement with its Agent was that the Agent required instructions from the patentee before paying the annual maintenance fee [10]. For many years the fees were paid on time pursuant to those instructions [11]. In 2020 the Agent reminded the patentee that the fees would have to be paid, a full five months before the deadline [12]. The Agent heard nothing from the patentee. The Agent sent many email reminders to the patentee, but never heard anything back, and so did not pay the fee. The Agent sent more email reminders about the possibility of reinstatement, but still did not hear anything. The six month deadline expired, and on October 20, 2020, the Agent sent the patentee an email notifying him of this fact. Finally, nine days later, the patentee found this correspondence in his junk mail folder [16]. The evidence indicates that this was the problem all along – even though the Agent and the patentee had been successfully communicating by email for almost a decade, for some reason, in 2020 the Agent’s email started going to the patentee’s junk mail folder.

The patentee sought to have the patent reinstated pursuant to s 46(5). The Commissioner refused, on the basis that the “due care” standard had not been met. Furlanetto J affirmed.

The take-away is that if an Agent has been relying on email for years to communicate with their client without any problem, and the client stops responding, the Agent needs to double check that the emails are still getting through:

[41] In the circumstances applicable here, on a substantive review, it is my view that it was reasonable for the Commissioner to have looked at steps that could have avoided the communication failure and to have expected that the Agent would have additional communication mechanisms in place to make sure they could always correspond with the Applicant. It was likewise reasonable to have expected that in circumstances where numerous notices from the Agent had gone unanswered and where non-compliance could lead to expiry of patent rights that these alternative measures would have been used to ensure that the patentee was aware of the deadlines at issue. Particularly as there had been a consistent pattern of payment since 2012.

[42] Similarly, in my view it was reasonable for the Commissioner to expect that a reasonably prudent patentee would have a system in place to make sure that their email was operating effectively if they were relying on this as the primary communication means to pay their maintenance fees. This is especially so as the Applicant retained the responsibility to instruct the Agent on a yearly basis to pay the maintenance fee. Having retained this responsibility, it was reasonable for the Commissioner to find that it was incumbent on the Applicant to exercise due care to ensure that his email was properly receiving messages so that he could provide instructions to the Agent in a timely manner.

Is a Sale Accompanied by an Unrestricted Implied Licence to Use?

Pharmascience Inc v Janssen Inc 2024 FCA 10 Locke JA: de Montigny CJ, Goyette JA affg Janssen Inc v Pharmascience Inc 2022 FC 62 Manson J

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

This decision addresses a tricky and interesting point regarding implied licences in the context of the first prong of the Corlac 2011 FCA 228 [162] test for inducement, which requires that “the act of infringement must have been completed by the direct infringer.” Janssen’s 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 on day 1; a second loading dose of 100 mg-eq on day 8; and subsequent maintenance doses of 75 mg-eq monthly thereafter [2]. Pharmascience proposed to sell the loading doses, but not the maintenance doses, which would be supplied by Janssen [17]. In this NOC proceeding, Pharmascience brought a motion for summary trial on the basis of non-infringement, arguing that even though the end-users, such as physicians and patients, would practice the invention, there would be no direct infringement because any end-user must be taken to have an implied licence from Janssen to use the maintenance dose for any purpose, including using it as part of the patented combination.

At first instance, Manson J held in favour of Janssen, finding that Pharmascience would induce infringement of the 335 Patent with its generic version of INVEGA SUSTENNA [3]: see here. The action proceed to trial on the patent validity issues raised by Pharmascience. Janssen again prevailed at trial, 2022 FC 1218. An appeal has been heard and is under reserve [3]. In my post on Manson J’s decision, I had noted that his decision in this case was essentially a companion case to Janssen v Apotex 2022 FC 107, which involved the same patent and the same type of generic product. However, the issues raised on appeal were quite different, as the Apotex appeal turned on the second prong of the Corlac test: see here.

This appeal therefore turned on whether the end-users, who purchased the maintenance doses from Janssen, should be taken to have an implied licence to use those maintenance doses to practice the invention in combination with the loading doses supplied by Pharmascience.

Locke JA started by summarizing the basic rule as follows: “it is clear that the sale of a patented article without restriction includes the right to use that article as the purchaser pleases,” unless a restriction is brought home to the purchaser on sale. He cited ample authority for this proposition [16], [15]. While Janssen did not dispute this rule, Janssen relied on MacLennan 2008 FCA 35, in which the patent related to “a saw tooth and tooth holder combination.” The tooth and tooth holder were separate parts, and the combination was attached to the periphery of a circular saw disc for feller heads in the forestry industry: MacLennan [4]. If the saw struck rocks while logging, individual teeth and sometimes also the holders would be broken without damaging the saw disc. The patentee sold both the tooth holder and the teeth themselves, and the defendant manufactured and sold replacement teeth to be used by the patentee’s customers with tooth holders purchased from the patentee [24]. Janssen argued that MacLennan was “on all fours” with the case at hand [25]. Pharmascience tried to distinguish MacLennan on the basis that the issue concerned the extent of the implied right of a purchaser to repair [26]. Locke JA quite rightly rejected this as being a misreading of MacLennan [26], [27].

How then can we reconcile MacLennan with the rule that the purchaser of an embodiment of the patented invention has the right to do as they please with it? Janssen argued that “the jurisprudence concerning implied license is limited to the patented article itself” [17]. Locke JA accepted this argument, saying that in MacLennan and similarly in Angelcare 2022 FC 507 (here), “the patented invention constituted a combination invention and therefore, the sale of a mere component of it was insufficient to grant the implied right to use the entire combination” [29]. He therefore held that:

[29] [T]he sale of a mere component of [a combination invention is] insufficient to grant the implied right to use the entire combination. To grant an implied licence, the sale of the entire combination had to occur, or at least, as in Slater Steel [(1968) 55 CPR 61 (Ex Ct)], the parties’ intended use of the component at the time of sale contemplated its use in the patented combination.

So, no implied licence arose in this case because Janssen sold the maintenance doses separately and this does not imply a licence to use the combination. That justifies the result in this case, as it means that the prescribers or patients who use the Pharmascience loading doses in combination with the Janssen maintenance doses are direct infringers.

But there is a problem. When does an implied licence arise? What about when Janssen sells a maintenance dose that is used in combination with a Janssen loading dose? Surely the users are not infringers. Under the first clause of Locke JA’s statement, the sale of the maintenance dose does not grant an implied licence to the use the combination, for the same reason as when the loading doses are sold by Pharmascience. Perhaps an implied licence is granted under the second clause, since it is certainly true in that case that “the parties’ intended use of the component at the time of sale contemplated its use in the patented combination.” The problem is that is also true when Janssen sells a maintenance dose that is then used in combination with a Pharmascience loading dose. If the second branch saves the user when the loading dose is sold by Janssen, it also saves the user when the loading dose is sold by Pharmascience. The only way that it is an infringement to use the Janssen maintenance doses in combination with the Pharmascience loading doses, but not with the Janssen loading doses, is if the sale by Janssen is accompanied by a restricted implied licence, which allows the use of the Janssen product only with another Janssen product.

The root of the problem is the notion that when a licence is implied, it is a licence “without restriction [that] includes the right to use that article as the purchaser pleases.” The licence that arises in MacLennan, Angelcare and in this case, is a restricted licence, to use the article in combination with another article that is also sold by the patentee. There is no way to reconcile these cases with the notion that a sale implies an unrestricted licence to use the article, no matter how the conditions of the sale itself are qualified. If the licence to use the product is unrestricted it doesn’t matter whether we say it arises when the product is sold, or only when the combination is sold, or what the intent of the parties is; the only way to get an answer that is consistent with the cases such as MacLennan is if the implied licence is restricted. Moreover, we can’t even say that the general rule is that the sale in the context of a combination invention grants a restricted implied licence to use the article in combination with other articles sold by the patentee, because in Slater Steel the patentee only sold one component of the combination (namely a power line reinforcing rod), and the other part of the combination (the power line) was supplied by third parties. In Slater Steel, the sale did convey an unrestricted implied licence.

Thus, I would suggest that the basic rule that “the sale of a patented article without restriction includes the right to use that article as the purchaser pleases,” while well supported by the authorities cited by Locke JA, is not sound as a general proposition. The sale of a patented article will often imply a licence to the use the article on the particular facts, but this is not the same as saying that it necessarily implies an unrestricted licence to use.

The difficulty arises because the proposition that the sale implies a right to use is based on logic that conflates ownership rights with patent rights. Consider the following passage from the decision of Pratte JA in Eli Lilly v Apotex (1996), 66 CPR (3d) 329, 343 which was quoted with approval by the SCC in Eli Lilly [1998] 2 SCR 129 [99]:

A patentee has a monopoly. By virtue of his patent, he has, says section 42 of the Patent Act, "the exclusive right, privilege and liberty", during the term of the patent, "of making, constructing and using the invention and selling it to others to be used". If a patentee makes a patented article, he has, in addition to his monopoly, the ownership of that article. And the ownership of a thing involves, as everybody knows, "the right to possess and use the thing, the right to its produce and accession, and the right to destroy, encumber or alienate it" [quoting Jowitt's Dictionary of English Law]. If the patentee sells the patented article that he made, he transfers the ownership of that article to the purchaser. This means that, henceforth, the patentee no longer has any right with respect to the article which now belongs to the purchaser who, as the new owner, has the exclusive right to possess, use, enjoy, destroy or alienate it. It follows that, by selling the patented article that he made, the patentee impliedly renounces, with respect to that article, to his exclusive right under the patent of using and selling the invention. After the sale, therefore, the purchaser may do what he likes with the patented article without fear of infringing his vendor's patent.

The logic is that ownership of the thing includes the right to use it, and therefore the transfer of the thing transfers to the right to use it. But ownership rights in the tangible product and patent rights relating to that product are distinct, as Pratte JA himself recognizes, and as a consequence, transfer or ownership of tangible product embodying the patent rights does not necessarily imply any transfer of patents rights.

This is illustrated by Eli Lilly itself. The SCC held that “it is clear that, in the absence of express conditions to the contrary, a purchaser of a licensed article is entitled to deal with the article as he sees fit, so long as such dealings do not infringe the rights conferred by the patent” [101] (my emphasis). The SCC accepted that “the rights of use and sale” are inherent in the unrestricted purchase of a licensed article [98], but this does not necessarily extend to the right of making. The purchaser had bought bulk product from a licensed vendor and reformulated it into final-dosage form. The SCC held that this reformulation did not constitute “making” [101], but it is clear that if it had, that would have constituted infringement. On its face, Eli Lilly holds only that a licence to use and sell are implied by an unrestricted sale, not a licence of all patent rights. Now, this is not inconsistent with the rule stated by Locke JA, which was only that the right to use is implied. The cases cited usually include the right to sell as well. But Eli Lilly shows that transfer of ownership in the tangible property embodying a patented invention is separate from the patent rights.

If the transfer of ownership in the thing does not necessarily transfer the right to make, as is clear from Eli Lilly, on what principle does it necessarily transfer the right to use? One answer is that the right to use is inherent in the right of ownership. This was the position taken by the JCPC in National Phonograph v Menck (1911) 28 RPC 229 (JCPC) 245, in which Lord Shaw began with the principle that the owner of “ordinary goods” is entitled to “use and dispose of these as he thinks fit,” so that a transfer of the right of ownership transfers that right to use and sell the goods. An implied patent licence to use and sell was seen as a way of reconciling that principle with the patentee’s patent rights: Menck 245.

But it is not strictly true that the owner of ordinary goods has the right to “use and dispose of these as he thinks fit,” because many rights and obligations distinct from the ownership right may constrain the owner’s right to use the goods they own. For example, if I own a car, I do not have the right to drive over the speed limit on the highway, and by the same token, if I sell the car to you, you do not acquire the right to exceed the speed limit. Similarly, if I own a quantity of an unpatented drug, I nonetheless do not have the right to use it for a patented purpose, unless I have a licence from the patentee. If I sell that drug to you, I clearly do not transfer the right to use it for the patented purpose, because I am not the patentee.

In response to this, it might be said that the prohibition on speeding is imposed by the state, not by me. My sale to you does not imply that no one else will interfere with your use of the car, but only that I will not interfere with your use of the car. But if I park my car in my own driveway, my sale of the car to you does not give you the right to park in my driveway, even if you might find it convenient to do so. That is because my ownership rights in the car and my rights in my land are separate, and a grant of one does not imply a grant of the other.

The general point is that the transfer of ownership rights in a tangible product good does not generally imply a licence to use those goods free of any other rights that the vendor might have that potentially restrict what the purchaser wants to do with the purchased goods. And it is clear my sale of a tangible thing that I own cannot transfer patent rights I do not own. But what if I do own the patent rights as well as the ownership rights? Is there something special about patent rights such that an unrestricted licence to use must always be implied in such a case?

Suppose P discovers a new drug, call it ‘tramifloxin,’ which P discovered is useful in treating ulcers. P gets a patent on the drug per se and successfully markets it for treating ulcers under the brand name ULCEX. P’s product patent on tramifloxin ultimately expires and P exits the market entirely, leaving it to the generics. But because P has expertise in tramifloxin, it continues to research new uses, and discovers, surprisingly and unexpectedly, that tramifloxin is also useful in treating psoriasis. P then get a second patent for the use of tramifloxin in treating psoriasis. P then successfully markets and sells tramifloxin, under the brand name PSOREX, for treating psoriasis. In that case, P’s sale of tramifloxin would not grant anyone else a licence to use tramifloxin to treat it psoriasis. But suppose P did not exit the market for ulcer treatment after the product patent expired, but instead continued to sell ULCEX. Would P’s sale of ULCEX be accompanied by an implied licence to use it to treat psoriasis? Would it matter if P sold ULCEX through an authorized generic?

What if P discovered and patented the psoriasis use before its patent on the tramifloxin per se expired, and while it was still actively marketing ULCEX. Would it matter if ULCEX was the bigger market? Would the sale of tramifloxin under the ULCEX brand imply a licence to use it to treat psoriasis? It might be said that the answer is yes, unless P gives notice that it is to be used only for treating ulcers. But that is not desirable either for P or for society. P does not want the use of ULCEX to be restricted to treating ulcers. It is in the interest of both P and society for purchasers to develop new off-label purposes, as that will expand P’s market and cure more diseases for the benefit of society. What P wants is for ULCEX not to be used to treat psoriasis. In response to that, it might be said that P should give notice on the ULCEX that it is not to be used to treat psoriasis. But how could P have given such notice before P knew that tramifloxin could be used for treating psoriasis? Does that mean that the stock of ULCEX that was in circulation before P obtained the patent can now be used to treat psoriasis? Further, if it was a third party, not P, that had obtained the psoriasis use patent, the person purchasing ULCEX from P would not get an implied licence to use it to treat psoriasis, regardless of whether P gave any kind of notice on the ULCEX. Why should P be in a worse position than that third party? Whether P holds the patent or a third party does makes no difference to the purchaser, who in either case will be is ‘surprised’ (or not) to discover that ULCEX cannot be used to treat psoriasis. Patent rights are strict liability, and the mere fact that a purchaser might not know that it does not have unrestricted rights to use has never been sufficient grounds to imply a licence. For example, if P sold the ULCEX to a intermediary subject to an express restriction that it could not be resold or used for the purpose of treating psoriasis, a purchaser from the intermediary would not acquire a right to use it for the patented use: Isler (1906) 1 Ch 605, 611 (CA). Of if P had assigned the use patent to a third party before selling the ULCEX, the purchaser would clearly not acquire a licence to use it to treat psoriasis: Betts v Willmott (1871), LR 6 Ch App 239, 244.

I am not arguing for any particular answer to these questions. My argument is only that these are difficult questions and it is not obvious that a simple rule that the sale of the product implies a licence to use the patent. Whether a licence should be implied is a question that should be answered on the facts, and not on the basis of a broad rule. These examples are somewhat artificial, but that is because it is true that a sale of a product will often imply a right to use the patented technology embodied in that product.

On that note, it might be said that the true rule is that if P sells V a product that can only be used in a way that would infringe P’s patent, then a licence to use should be implied. Most of the leading cases relied on by Locke JA were of this type — the patent at issue claimed a product, and the use of the product would necessarily infringe, so when the patentee sells that product, it would necessarily be accompanied by an implied licence to use the product. But this theory runs right into MacLennan, as the patentee in that case sold the tooth holder which could only be used in the patented combination. That is why Locke JA was forced to restrict the rule to a case in which the entire product was sold, or the entire combination was sold, or in which the patentee sold only one component but intended it to be used in the patented combination. At this point, we do not have much of a general rule left. What is the difference between stating a general rule that is tailored to a set of very specific circumstances, and simply saying that a licence will be implied when it is reasonable to do so on the facts?

This brings me back to my original point. Patent rights and rights of ownership of an embodiment of the invention are separate rights. The transfer of ownership does not necessarily imply any transfer of the patent rights. It is clear from Eli Lilly that the sale does not imply a licence to make. There is no difference in principle in respect of a right to use. It may be that it is more common that a licence to use will be implied from a sale on the facts, but that is not a matter of principle. In the context of combinations, an implied licence to use may be restricted, or unrestricted; that turns on the facts, and is not a matter principle. I suggest that the general point that emerges from all this is simply that there is no general principle that sale of a product implied a licence to use. Whether an implied licence accompanies the sale is a matter for the specific facts.

Locke JA was in a difficult position. The basic rule that “the sale of a patented article without restriction includes the right to use that article as the purchaser pleases,” is supported by ample authority. But that rule is inconsistent with MacLennan, which was clearly correctly decided. Locke JA had to find some way to restrict the scope of the general rule. The distinction he chose is intuitively appealing, but I have argued that it is ultimately unsatisfactory. With that said, I can’t think of a better approach, short of recognizing that the basic rule is itself unsound as a general proposition.