What Is the Threshold for Influence in Inducement?

Apotex Inc v Janssen Inc 2024 FCA 9 Locke JA: de Montigny CJ, Goyette JA affg Janssen Inc v Apotex Inc 2022 FC 107 Manson J

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

This decision addresses the second prong of the Corlac 2011 FCA 228 [162] test for inducement in the pharma context. In some ways it is perfectly straightforward. Manson J found as a fact that Apotex’s product monograph (PM) was the ‘but for’ cause of direct infringement and the FCA affirmed on that basis. Locke JA’s decision nonetheless raises two notable issues. First, there seems to be an unresolved tension between this decision and Teva v Janssen 2023 FCA 68 as to the standard for influence on the second prong of the Corlac test; while this decision endorses a high threshold of ‘but for’ causation, Teva v Janssen apparently endorses a lower threshold. Second, while Locke JA explicitly endorsed a test of ‘but for’ causation, some of his comments imply a different approach.

Manson J’s decision was heavily redacted and I did not fully appreciate the issues when I wrote my post on it. The FCA decision has not been redacted and the key issues are much easier to understand. With that said, some aspects of the FCA discussion remain obscure to the extent that they turn on redacted discussion of the facts at trial. In my earlier post I had noted that Manson J’s decision in this case was essentially a companion case to Janssen v Pharmascience 2022 FC 62, which involved the same patent and the same type of generic product. However, the issues raised on appeal were quite different, so I’ll deal with the Pharmascience decision in a separate post.

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 two loading doses of 150 mg-eq and 100 mg-eq, and subsequent monthly maintenance doses of 75 mg-eq [2]. In this NOC proceeding, Apotex brought a motion for summary trial on the basis that it would not infringe because it would not provide the 75 mg-eq dose, which is an essential element of the claimed invention [3]. That is, Apotex intended to market the loading doses but not the maintenance doses, which would be supplied by Janssen: see Pharmascience [8]. This looks like a strategy to get part of the market while trying to avoid infringing. At first instance, Manson J held in favour of Janssen, finding that Apotex would induce infringement of the 335 Patent with its generic version of INVEGA SUSTENNA [3].

The direct infringers would be the prescriber (eg a physician or a nurse practitioner) or patient [24] and Janssen therefore relied on inducement. Infringement by inducement is governed by the three part Corlac test, which Manson J correctly summarized as follows [4]:

There is a three “prong” test for inducement: (1) direct infringement by a third party; (2) the inducer influenced the third party to the point that the infringing act would not have occurred without the influence; and (3) the defendant knew that its influence would bring about the infringing act.

All three prongs were disputed at trial, with Janssen prevailing on all three [5]. On appeal, Apotex only took issue with Manson J’s decision on the second prong.

The second prong of the Corlac test is normally satisfied if the defendant supplies a non-infringing product accompanied by instructions to use that product in an infringing manner. So, in a typically skinny label case in the pharma context, the drug itself is unpatented but a use is patented. Direct infringement and knowledge are normally conceded, and the case will turn on the second prong, and in particular whether the generic has managed to scrub its product monograph (PM) clean of any reference to the infringing use. This case is different, as Apotex’s PM “would essentially be a copy of that for INVEGA SUSTENNA” [14]. I take it from all this that Apotex did intend to supply its non-infringing product — the loading doses — accompanied by instructions to use it in an infringing manner, which is to say as part of the patented regimen. The FCA decision isn’t more explicit than the phrase I have just quoted, and the FC decision isn’t clear on this because of the redactions, but on appeal in the Pharmascience case, it was no longer disputed that Pharmascience’s PM contained instructions concerning the use of the 75 mg-eq. dose (Pharmascience [11]) and while that is of course a difference case, my understanding is that the facts were essentially the same. This post therefore proceeds on that assumption.

Given that defendants are regularly found to be inducing infringement by supply of an unpatented product accompanied by instructions to use it in an infringing manner, and Apotex did just that, how did Apotex try to avoid liability?

Apotex’s main argument was to the effect that no one will read Apotex’s PM and therefore no one will be induced by it. This argument has been made before, and always failed: see generally my paper “Is 'But For' Causation Necessary to Establish Inducement?” But the point turns on the evidence, and it is at least plausible — no one is arguing that physicians always consult the generic PM and prescribe strictly according to it—so it is always worthwhile for a generic to try the argument again, to see if it can get a better result on the facts.

The legal aspect of the argument turns on the threshold for causation at the second prong. Corlac [162] itself put the test this way: “the completion of the acts of infringement must be influenced by the acts of the alleged inducer to the point that, without the influence, direct infringement would not take place.” This implies a test of “but for” causation. While there is certainly considerable caselaw that articulates the test this way, I have argued that other caselaw supports a less stringent test, along the lines of “encouragement to infringe,” and that there is very little caselaw in which the result actually turns on the precise test for causation at the second prong: see “Is 'But For' Causation Necessary to Establish Inducement?”

The threshold is important because if it is simply “encouragement to infringe,” then any party who sells a product along with instructions to use it in an infringing manner will be liable for inducement (if the other prongs are satisfied). But if the threshold is “but for” causation, then it matters whether the direct infringer actually pays any attention to the instructions. If no one actually reads the instructions and therefore no one changes their behaviour as a result of the instructions, then any direct infringement would have happened in any event and it cannot be said that “without the influence, the direct infringement would not take place.”

So, consider a hypothetical case where the patent relates to the use of ammonia, an unpatented bulk commodity, for a novel purpose, namely to encourage growth of subterranean bacteria to aid in fracking. The patentee, P, sells ammonia for that purpose. In Scenario 1, the direct infringer, DI, goes to P to buy ammonia for fracking, and discovers it is priced at $2000/t, while the market price for bulk ammonia is $400/t. DI politely walks out of P’s establishment and instead buys ammonia from a different vendor, V, who sells bulk ammonia to clients who mostly use it for fertilizer production. V does not have a licence from P to sell ammonia for fracking. DI nonetheless uses the ammonia purchased from V for fracking. DI is therefore a direct infringer. V did not influence the direct infringer at all. V had no idea what DI planned to do with the ammonia; indeed, V had no idea that ammonia could be used for growing subterranean bacteria and would have mocked the idea. It is clear law that V is not an indirect infringer, even though V supplied the ammonia used by DI to infringe. Doctrinally, it is the second prong—the influence requirement—that relieves V from liability in this example, because V did not induce influence DI’s plan. This would be true even if DI had told V what he was going to use the ammonia for, and V had replied “Sure, buddy, whatever. It’s yours once I sell it to you.” That is why the influence prong is separate from the knowledge prong.

Now, in Scenario 2, suppose that DI did not initially know that ammonia could be used for fracking, but V did. DI goes in to buy ammonia for another purpose, and V says “Do you know ammonia can also be used for fracking.” DI is curious and V hands DI an instruction sheet on how to use ammonia for the infringing purpose. DI says “That sounds great! I can make a bundle” — and buys some ammonia and uses it to infringe. In that case, V is clearly inducing infringement, even on the high “but for” threshold, since DI would not have infringed but for V’s influence.

Finally, in Scenario 3, suppose that both DI and V knew that ammonia could be used for fracking. DI goes in to buy ammonia for that purpose. At the time of sale, V hands DI an instruction sheet entitled “Three great things to do with ammonia.” The first thing on the list is fracking, with detailed instructions. DI takes the sheet, glances at the title, and thinks “I don’t need tips — I know perfectly well what I’m going to do with this ammonia.” DI scrunches the sheet into a ball and throws it away, without reading anything past the title. In that case, the instructions do not actually influence DI. The test from Corlac is “without the influence, direct infringement would not take place.” In this scenario, direct infringement would take place, even without the influence, and so, on its face, the second prong of the Corlac test is not satisfied.

Apotex’s basic argument, as I understand it, is that this is a Scenario 3 situation. Yes, it supplied instructions to infringe, in the form of its PM, but the direct infringers never paid attention. They got their information from Janssen’s PM, or from the scientific literature, but not from Apotex’s PM.

This argument rests on two pillars. The first pillar is legal. The threshold for influence has to be high; on an encouragement standard, it is enough that Apotex sold the product with instructions to use it in an infringement manner and it does not matter if no one paid attention to Apotex’s PM. The second pillar is factual. It has to be established on the evidence that the users did not pay attention to Apotex’s PM. If at least one person was (or would be, in an NOC action) actually influenced to infringe by the PM, then it does not matter whether the threshold is high or low.

Turning to the first pillar, what is the threshold for influence? In this case, Manson J clearly endorsed a strict “but for” causation:

[127] The “but for” influence required in the second prong of the Corlac test sets a high bar – higher than “encouragement to infringe,” a “subtle reference” to the infringing use, or “attempting to induce others to infringe.”

Locke JA affirmed this high threshold:

[13] Apotex urges this Court to treat the threshold as a “but for” test, and it cites jurisprudence that calls this a causation test. I have no objection to Apotex’s characterization of the test, but I do not find it to be more helpful that the “would not have occurred without” and “sine qua non” characterizations provided in the jurisprudence of this Court. In my view, these are merely different ways of describing the same threshold.

This clearly affirms a high “but for” threshold, pointing out some equivalent ways of stating the same test.

While this statement is clear, there is a problem. In Teva v Janssen 2023 FCA 68 revg Manson J’s decision in 2020 FC 593, the FCA apparently endorsed a lower threshold, calling the “but for” threshold which Manson J had endorsed [FC 264] “unduly onerous” [FCA 82]: see here for my discussion. As just noted, in this case Locke JA clearly endorsed a “but for” causation threshold for influence, so it looks to me like there is a tension between these cases. Perhaps I misunderstood Teva v Janssen and read too much into it. I am not going to try to sort this out in this post, except to say that it is not clear to me how reconcile the decisions. Presumably the FCA will clarify matters in due course. I note that the panels were different — Stratas, Gleason, Woods JJA (for the Court) in Teva v Janssen, with Locke JA, de Montigny CJ and Goyette JA concurring, in this case. Locke JA was clearly aware of the Teva v Janssen decision, as he referred to it, albeit not directly on this point [8].

In any event, it is clear that the high “but for” threshold applies for the purposes of this case. One pillar of Apotex’s argument is in place.

What about the second pillar? Apotex argued that the evidence was that the direct infringers did not pay any attention to the PM. This is how Manson J described it:

[132] The crux of Apotex’s argument related to this second prong is that the experts all agree that the ultimate dosing decision is based on physician skill and judgment, not the language in the product monograph. Further, physicians have been steeped in the claimed dosing regimen throughout their training, clinical experience, and use of the INVEGA SUSTENNA® product. As such, the introduction of the product monograph for the APO Product will not influence or change their prescribing practices and will not amount to the level of influence necessary to meet the second prong of the Corlac test.

This argument was rejected by Manson J, who said the following:

[147] Notwithstanding the exercise of skill and judgment by prescribing physicians in selecting the dosing regimen for patients, the evidence before the Court in this case establishes that acts of infringement will be influenced by the acts of the alleged inducer, Apotex, to the point that, without the influence, direct infringement will not take place. Apotex’s product monograph will influence prescribers and patients to implement the claimed dosage regimen, thereby directly infringing the 335 Patent.

[148] I am satisfied, on the evidence before the Court that Janssen has proven, on a balance of probabilities, that at least some prescribers of the impugned APO Product will be sufficiently influenced by the Apotex product monograph to induce infringement by those prescribing physicians.

The details of the evidence are not clear due to the redactions, but this conclusion certainly looks like a finding of fact that some direct infringers would be influenced, even on a ‘but for’ test.

Apotex tried to challenge this finding, arguing that “none of the experts went so far in their testimony as to state explicitly that any direct infringement using Apotex’s product would not occur without Apotex’s influence” [26]. Locke JA rejected this on the straightforward basis that this is a factual finding that Manson J was entitled to make:

[25] As indicated at paragraph 11 above, the Federal Court concluded at paragraphs 147 and 148 of its reasons that such infringement would be influenced by Apotex to the point that, without the influence, direct infringement would not take place. It is in this sense that the Federal Court was entitled to conclude that the second prong of the test for inducing patent infringement was met.

[27] In my view, this is a factually suffused issue on which Apotex would have to establish that the Federal Court made a palpable and overriding error. The Federal Court did not err in law.

That all seems to say that in fact, on the evidence, the direct infringers would be influenced by Apotex to the extent that the influence prong is satisfied even with a legal threshold of “but for” causation. Thus, Apotex succeeded on the legal pillar of its argument, but failed on the factual pillar. That is what I had understood to be the basis for Manson J’s decision when I wrote my post on it.

That much is very straightforward, and I would not normally have devoted so much space to it. But it is necessary context to some further, more puzzling remarks by Locke JA. Apotex’s central argument on appeal was as follows:

[14] Apotex relies on the fact that its product monograph would essentially be a copy of that for INVEGA SUSTENNA, and the assertion that prescribing practices of physicians would not change if Apotex were allowed to market its generic version of INVEGA SUSTENNA. In light of the foregoing, Apotex argues that any influence that its product monograph could have on any ultimate act of direct infringement could not rise to the level required in Corlac.

As we’ve just seen, Locke JA rejected this argument on the facts. Here is the puzzle — he also rejected it on the law:

[23] The main weakness of this argument is that it depends on there being a requirement that prescribing practices of physicians be altered because of Apotex’s activities. In fact, this is not necessary.

I’m not sure how to reconcile this statement with the “but for” threshold which Locke JA endorsed. The test from Corlac is “without the influence, direct infringement would not take place.” This clearly states that the influence must cause a change in outcome — with the influence, there is infringement, without it, there is not. If nothing changes as a result of the influence, how can it be said that the influence caused anything?

Locke JA continued (original emphasis):

[23] What is required is that the ultimate act of direct infringement occur because of Apotex’s activities. . . .

[25] It follows that, even if the practices of prescribing physicians were to remain unchanged following the introduction to the market of Apotex’s generic version of INVEGA SUSTENNA, the fact would remain that activities by patients (and by prescribers) that had previously been non-infringing (because the drug was sourced from Janssen) would be infringing once the drug was sourced from Apotex, an unlicensed supplier.

Here, Locke JA seems to be saying that indirect infringement is established because the direct infringers would use Apotex’s product instead of Janssen’s. That is undoubtedly true. But that is not enough to establish infringement by inducement. It is also true in Scenario 1. DI’s activity, that would have been non-infringing if the ammonia had been sourced from P, is infringing because it was sourced from V instead. But that in itself does not make V liable for inducement. It is uncontroversial and long-established law that a party who does no more than supply a non-infringing product that is used to infringe is not thereby an infringer, even if it causes the direct infringer to change suppliers; that is why the second prong of the Corlac test requires influence by the indirect party. This is entirely apart from the question of the specific threshold for influence.

What was motivating these remarks? Why did Locke JA not simply affirm Manson J on the factual finding of “but for” causation, and leave it at that? I would speculate that Apotex’s argument on the facts was quite strong, notwithstanding Manson J’s finding. (As noted, the evidence supporting his finding is unclear due to the redactions.) My impression from the evidence in the pharma inducement cases generally is that the substantial majority of physicians and pharmacists really do not rely on the generic PM and the courts are struggling with the evidence to make the result come out the way it ‘should’ by finding that at least some do rely on the generic PM. Perhaps Locke JA wanted to provide an alternative basis for the decision that would not turn on the factual finding alone. Perhaps this was to set the stage for the day that a trial judge finally decides on the facts before them that physicians do not read the generic PM. If so, I sympathize with Locke JA’s dilemma, but the statements in these two paragraphs seem to go beyond endorsing a lower threshold and seem tantamount to removing the influence requirement altogether.

With that said, I do not disagree with the result. In my view, there are two sound and principled bases by which the same result could be arrived at, even if it had been established on the facts that the direct infringers did not pay any attention to Apotex’s PM. One would be contributory infringement, a US doctrine under which the mere supply of good especially adapted to infringe, constitutes indirect infringement, without any need for inducement. For reasons I explain in my article “Contributory Infringement in Canadian Law” (2020) 35 CIPR 10, I am of the view that contributory infringement is a sound doctrine which is consistent with the bulk of Canadian caselaw. However, it is not recognized in Canadian law: see MacLennan 2008 FCA 35 [33], [38], [40]. And is most certainly not the basis for Locke JA’s decision in this case. The other basis would be under a lower “encouragement” threshold for influence. But that was not used by Locke JA in this case.

I’ll end this post on a different point entirely. As noted in my post on Manson J’s trial decision, this was essentially a companion case with Janssen v Pharmascience 2022 FC 62, also before Manson J, in which Pharmascience sought to launch the same kind of product as Apotex, ie the loading doses but not the maintenance doses. There was considerable overlap between Manson J’s two decisions — indeed, too much. Parts of para 138 of his Apotex decision were “lifted” from his Pharmascience decision, and consequently contained some factual inaccuracies; for example, para 138 referred to four experts, when there were in fact five in the Apotex case [17]–[18]. While Apotex tried to make something of this on appeal, Locke JA concluded that this was a “slip of the pen” error which did not demonstrate that Manson J had failed to fully consider the issues [20].