2022 was an active year in Canadian patent law. Claim fees were introduced for the first time; changes were made to regulations providing remedies for excessive pricing of patented medicines; and a range of court decisions addressed important issues.
We considered over 60 patent decisions reported last year. In this article, we highlight statutory changes and a selection of interesting points addressed in the reported decisions. For a comprehensive review of Canadian pharmaceutical decisions and developments, please see the 2022 Highlights in Life Sciences IP and Regulatory Law in our Rx IP Update.
- Claim fees and continued examination fees
- Sequence listing requirements
- Excessive prices of patented medicines
- Claim construction: Recourse to the description is necessary
- Claim construction: What is the impact of referring to a “use” in a claim preamble?
- The common general knowledge can establish a sound prediction of utility without rendering a claim obvious – Patent Act, Section 2
- Dosing regimens can be patentable; in the right context – Patent Act, Section 2
- Privileged communications – Patent Act, Section 16.1
- Sufficiency is assessed having regard to the issued patent – Patent Act, Section 27(3)
- A new test for patentable subject matter – Patent Act, Section 27(8)
- Does the word “disclose” have a consistent meaning in the Patent Act? - Patent Act, Section 28.1
- An implied obligation of confidentiality may avoid an anticipatory disclosure – Patent Act, Section 28.2
- Not all prior art is equal in an obviousness analysis – Patent Act, Section 28.3
- Simultaneous invention is not determinative of obviousness – Patent Act, Section 28.3
- Infringement – Patent Act, Section 42
- A first look at Canada’s revised prior use defence – Patent Act, Section 56
- Who is a “second person”? Patented Medicines (Notice of Compliance) Regulations, Section 5(1)
- A second person is not limited to a counterclaim based on asserted claims – Patented Medicines (Notice Of Compliance) Regulations, Section 6(3)
- When are summary proceedings appropriate? – Civil procedure
- Where does the burden for the determination of the merits of a summary trial lie? – Civil procedure
Claim fees and continued examination fees
September 2022 was a busy month in the Canadian Patent Office as applicants rushed to request examination of pending applications and file new applications with examination requests to avoid excess claim fee and continued examination fee rules that came into force on October 3, 2022. Previously, no fees associated with the number of claims were payable in Canada, nor were there fees associated with the number of Examiner’s Reports that might issue.
The new rules find their genesis in the election of Donald Trump to the US presidency in 2017 and, at his initiative, the renegotiation of the North American Free Trade Agreement (NAFTA) resulting in its replacement by the Canada-United States-Mexico Agreement (CUSMA). Commencing January 1, 2025, CUSMA requires Canada to grant patent term adjustment for Patent Office delay for all applications filed on or after December 1, 2020. The claim fee and continued examination fee rules aim to reduce patent application pendency and streamline the examination process in view of the pending requirements for patent term adjustment.
Under the new rules, a government fee of CAD $100 ($50 for a small entity) is payable for each claim over 20 in applications in which examination has been requested on or after October 3, 2022. Fees are calculated based on the greatest number of claims pending at any time from when the examination is requested to when the issue fee is paid. A request for continued examination and a government fee of $816 ($408 for a small entity) are required in order to respond to the third Examiner’s Report and every second subsequent Examiner’s Report.
For more details about the new rules and strategies for safe and cost-effective prosecution practices under the new rules, please see our articles of June 8, 2022, October 3, 2022 and November 3, 2022.
Sequence listing requirements
The sequence listing provisions in the Patent Rules were also amended in 2022. The amended rules require compliance with the new WIPO sequence listing standard ST.26 for Canadian patent applications having a filing date on or after July 1, 2022. Transitional provisions permit patent applications having a filing date before July 1, 2022 to contain a sequence listing in either the new WIPO sequence listing standard ST.26 or the previous ST.25 format. Because the Canadian filing date of a PCT application entering the Canadian national phase is the PCT international filing date, the new sequence listing rules will have an immediate impact only on non-PCT applications.
Excessive prices of patented medicines
The Patented Medicine Prices Review Board (PMPRB) established under section 91 of the Patent Act reviews prices of patented medicines sold in Canada based on a comparison to prices in other markets. If the Canadian price is found to be excessive, the PMPRB can order patentee to do one or more of the following to offset excess revenues: reduce the price of the medicine sold in Canada; reduce the price of another medicine sold in Canada; or pay to His Majesty in right of Canada a sum specified in the order.
After consultations, delays, and court challenges concerning the constitutionality of some of the proposed changes, amendments to the Patented Medicines Regulations under which the PMPRB operates came into force on July 1, 2022. Most significantly, the countries upon which price comparisons are based have changed. The former “PMPRB7” of France, Germany, Italy, Sweden, Switzerland, the United Kingdom, and the United States has been replaced with the “PMPRB11,” of Australia, Belgium, France, Germany, Italy, Japan, Netherlands, Norway, Spain, Sweden, and the United Kingdom, a basket of countries intended to be more representative, and significantly excluding Switzerland and the United States, two jurisdictions with highest prices.
A challenge to the revision of basket of comparator companies by Innovative Medicines Canada and sixteen innovative pharmaceutical companies on the basis that the revision was inconsistent with the purpose of the Patent Act and was for the improper purpose of regulating or controlling prices or setting reasonable prices was rejected by the Federal Court (Innovative Medicines Canada v Canada (Attorney General), 2020 FC 725), a decision upheld by the Federal Court of Appeal, 2022 FCA 210). The constitutionality of the revision of the basket of comparator countries was also upheld by the Court of Appeal of Quebec in Merck Canada Inc c Procureur général du Canada, 2022 QCCA 240.
For more information about the amended rules and draft PMPRB guidelines under the new rules, please see our articles of June 30, 2022 and October 11, 2022.
For more information regarding the decision of the Federal Court of Appeal in Innovative Medicines Canada v Canada (Attorney General) and the decision of the Court of Appeal of Quebec in Merck Canada Inc c Procureur général du Canada, please see our December 12, 2022 and February 22, 2022 articles.
Claim construction: Recourse to the description is necessary
The Supreme Court of Canada has emphasized the importance of adherence to the language of the patent claims to promote fairness and predictability, but at the same time that the claims must be construed in an informed and “purposive” way, the words chosen by the inventor being read in the sense the inventor is presumed to have intended. A question sometimes arises whether recourse to the specification is permissible where a claim feature appears to have an unambiguous meaning based on the plain language of the claim.
In Biogen Canada Inc v Pharmascience Inc, 2022 FCA 143, the Federal Court of Appeal confirmed that the claims are to be construed having regard to the description irrespective of whether they ostensibly have a simple and unambiguous meaning on their face. An inventor may define terms in a manner that may differ from their plain and simple meaning. If the description is not considered, then the inventor’s objective intention as expressed in the specification may not be respected.
Similarly, in Google LLC v Sonos, Inc, 2022 FC 1116, the Federal Court rejected Google’s assertion that “recourse to the patent disclosure to ascertain the meaning of terms in the claims is impermissible when the terms in the claim are unambiguous” (underscoring added), and relied on the description in concluding that “echo cancellation” and “noise suppression” are distinct and mutually exclusive processes. Google has appealed the decision (A-207-22).
For a further discussion of the Federal Court of Appeal’s decision in Biogen Canada Inc v Pharmascience Inc, please see our August 29, 2022 article.
Claim construction: What is the impact of referring to a “use” in a claim preamble?
The preamble of a claim defines the category of the invention being claimed. However, it is also common for the preamble to refer to a purpose of the claimed invention. This is often achieved by reciting the claimed product is “for use” in a particular manner.
In Allergan Inc v Apotex Inc, 2022 FC 260, the Federal Court construed a claim reciting “An oral dosage form of a bisphosphonate for use with or without food or beverage intake” as being directed to an oral dosage form that can be used (i.e., can be consumed, administered or taken) at the choice of the user/patient either with or without food or beverage intake. The Court held that the Apotex product, which is restricted to use with food, did not infringe the claim and would not induce infringement. The product monograph clearly directed that Apotex’s product only be taken with food.
For a further discussion of the Federal Court’s decision in Allergan Inc v Apotex Inc, please see our March 24, 2022 article.
The common general knowledge can establish a sound prediction of utility without rendering a claim obvious – Patent Act, Section 2
So that the patent bargain is met and the inventor provides to the public more than mere speculation, the utility of the claimed invention must be established at the filing date either by demonstration or sound prediction. However, arguing that the common general knowledge of a person of ordinary skill in the art at the time of filing supports a sound prediction of utility may feed into an argument that the claimed invention was obvious.
In Pharmascience Inc v Teva Canada Innovation, 2022 FCA 2, the utility of the claimed invention had not been demonstrated before filing and there were no experiments in the patent that could serve as a factual basis for a sound prediction of utility. The factual basis was therefore predicated on the common general knowledge.
The Federal Court of Appeal rejected Pharmascience’s argument that, if the common general knowledge could be relied upon to establish a sound prediction, then the claimed invention must have been at least obvious to try. Noting that utility and obviousness are assessed at different dates and the legal tests for sound prediction and obviousness are distinct and different, the Court held that an idea may be sufficiently described in a patent and common general knowledge to support a sound prediction of utility yet not sufficiently known from the prior art (including but not limited to the common general knowledge) as to lead a person of ordinary skill in the art directly and without difficulty to the claimed invention.
Similarly, in Pharmascience Inc v Bristol-Myers Squibb Canada Co, 2022 FCA 142, the Federal Court of Appeal stated “[t]he routineness of testing required to put an invention into practice once it has been identified is not necessarily determinative of the obviousness of the invention itself.”
Dosing regimens can be patentable; in the right context – Patent Act, Section 2
The Canadian courts have held that methods of medical treatment are not patentable. In contrast, claims directed to medical “uses” are generally permitted, provided that they do not “encroach on the skill and judgment” of a physician. It is not always clear when a medical “use” claim crosses the line and becomes an unpatentable method of medical treatment. Claims directed to a “dosage regimen” are challenging.
In Janssen Inc v Pharmascience Inc, 2022 FC 1218, the Federal Court held that “use” claims including a “loading dose” regimen where a specific dose is administered on Day 1 and a different specific dose is administered on Day 8 (± 2 days), both in the deltoid muscle, followed by a “maintenance dose” regimen including doses of paliperidone palmitate administered monthly thereafter (± 7 days), in either the deltoid or the gluteal muscle, were not invalid as being directed to an unpatentable method of medical treatment. The claims did not require professional skill and judgment as the doses were fixed. Further, while timing and location of certain doses could vary, the choices did not have clinical significance. The Court found “[a] physician can choose to implement a claimed specific dosing regimen or not; however, skill and judgment are not required to implement the claimed dosing regimens.”
For a further discussion of the Federal Court’s decision in Janssen Inc v Pharmascience Inc, please see our September 20, 2022 article. Pharmascience has appealed the decision (A-205-22).
Privileged communications – Patent Act, Section 16.1
Section 16.1 of the Patent Act, which came into force on June 24, 2016, establishes privilege in communications between patent agents and their clients. A decision of the Federal Court in 2021 suggested that this privilege is limited (see, Janssen Inc v Sandoz Canada Inc, 2021 FC 1265).
Statutory privilege was again considered in Questor Technology Inc. v Stagg, 2022 ABQB 578. Before the Court was an application for production of further documents, some of which were identified as “Patent Agent Files”. Hewing to the above-noted decision in Janssen Inc v Sandoz Canada Inc, the Court noted:
- The statutory privilege is likely narrower than solicitor-client privilege or litigation privilege.
- The party asserting the privilege has the burden of establishing it, based on evidence.
- It is not a blanket privilege applying to the patent agent file as a whole.
- The court should review the disputed documents to determine whether privilege is properly asserted.
Thus, in line with the Federal Court, the Court of Queen’s Bench of Alberta gave limited scope to the statutory privilege. The Court decided that any Patent Agent Files where privilege is claimed were to be provided to the Court to determine what records, if any, are to be shielded from production.
Sufficiency is assessed having regard to the issued patent – Patent Act, Section 27(3)
Patent applications are frequently amended during prosecution to meet the requirements of patentability set out in the Patent Act. This can result in claims that are considerably different from those originally filed or published.
In Pharmascience Inc v Bristol-Myers Squibb Canada Co, 2022 FCA 142, the Federal Court of Appeal considered whether a claim was invalid for insufficiency where the specific compound claimed was not the focus of the originally filed claims. The Court held that the claims to be considered in an allegation of insufficiency are those as issued, noting that holding otherwise “would effectively read out subsection 27(6) [of the Patent Act], which contemplates amendments to bring the application into compliance with the sufficiency requirements”, and would result in an inconsistency with assessments of novelty and non-obviousness, which are carried out “based on the issued claims, not those pending prior to issuance”.
The Court noted that the true issue appeared to be whether “the addition of claims specific to apixaban introduced new matter” (emphasis added). On this point, the Court stated that it would not be inclined to find that claims to apixaban were not reasonably inferable from the original application, noting that an example in the original application describes apixaban and how to make it.
For a further discussion of the Federal Court of Appeal’s decision in Pharmascience Inc v Bristol-Myers Squibb Canada Co, please see our August 31,2022 article.
A new test for patentable subject matter – Patent Act, Section 27(8)
Prior to 2020, the Canadian Intellectual Property Office (CIPO) had long utilized the “problem-solution” approach to determine whether a particular claim feature was essential or not. This approach was criticized for allowing CIPO to disregard recited claim elements on the basis that these elements were not “necessary” for the characterized solution, and was ultimately found to be inconsistent with established principles of claim construction in Choueifaty v Canada (Attorney General), 2020 FC 837. CIPO subsequently revised its approach to determining patentable subject matter and adopted the “actual invention” approach. The new approach requires an Examiner to identify the actual invention of the claim, which “may consist of a single element that provides a solution to a problem or a combination of elements that cooperate together to provide a solution to a problem”.
CIPO’s new approach was rejected by the Federal Court in Benjamin Moore & Co v Canada (Attorney General), 2022 FC 923, where the Court noted that the “actual invention” approach continued to include CIPO’s “problem-solution” approach. The Court went further and, in remitting the matter to CIPO to reconsider the applications in issue, directed the Commissioner to apply a three-step legal framework for patentable subject matter proposed by the Intervener, the Intellectual Property Institute of Canada. The three-step framework requires an Examiner to:
- Purposively construe the claim;
- Ask whether the construed claim as a whole consists of only a mere scientific principle or abstract theorem, or whether it comprises a practical application that employs a scientific principle or abstract theorem; and
- If the construed claim comprises a practical application, assess the construed claim for the remaining patentability criteria: statutory categories and judicial exclusions, as well as novelty, obviousness, and utility.
The Attorney General of Canada has appealed the Federal Court’s decision (A-188-22), and the Federal Court of Appeal has since rejected a motion to strike brought by Benjamin Moore arguing that the appeal is beyond the jurisdiction of the Federal Court of Appeal because it seeks to appeal the reasons of the Federal Court and not the judgment (see 2022 FCA 194). The appeal has now been expedited.
For a further discussion of patentable subject matter and the Federal Court’s decision in Benjamin Moore & Co v Canada (Attorney General), please see our June 30, 2022 article.
Does the word “disclose” have a consistent meaning in the Patent Act? - Patent Act, Section 28.1
Pursuant to 28.1 of the Patent Act, the subject matter of a claim may have a “claim date” earlier than the filing date of the application if the application validly claims priority to “an application for a patent disclosing the subject-matter defined by the claim.” An early claim date can be significant, particularly where there is prior art between the priority and filing dates. A disclosure made available to the public before the filing date but after the claim date will not be citable in allegations of anticipation and obviousness.
In Paid Search Engine Tools, LLC v Google Canada Corporation, 2021 FC 1435, the Federal Court considered whether certain claims were entitled to the priority date of a US provisional application. Paid Search Engine Tools argued that the claim to priority is met if an “inference” can be drawn that the priority applications discloses the later application/patent. The Court rejected the idea that “a different meaning should apply to disclosure as it is used in subsection 28.1(1) such that disclosure is achieved merely if an inference can be drawn,” and found that the claims were not entitled to the claim date provided by the priority documents since the priority document did not disclose the later patent. Paid Search Engine Tools has appealed the decision (A-19-22).
An implied obligation of confidentiality may avoid an anticipatory disclosure – Patent Act, Section 28.2
In Angelcare Canada Inc v Munchkin Inc, 2022 FC 507, the Federal Court rejected an allegation that certain claims of the patents at issue were anticipated by a disclosure by the inventor of a computer-aided design (CAD) file of a refill for a diaper disposal system to third-party manufacturers more than a year before the filing date of the patents at issue. The Court concluded that because the recipient companies were in the business of making prototypes, they were inherently bound by an obligation of confidentiality despite the lack of any written non-disclosure agreement. Additionally, as the CAD files only showed part of a refill, with limited features, a skilled person would not have been able to understand and practice the claimed invention.
For a further discussion of the Federal Court’s decision in Angelcare Canada Inc v Munchkin Inc, please see our April 20, 2022 article.
Not all prior art is equal in an obviousness analysis – Patent Act, Section 28.3
The novelty and obviousness provisions of the Patent Act are found in section 28.2 and 28.3. Neither provision explicitly states that different pieces of prior art citable against a claim can be given different significance. Thus, on their face, the provisions do not suggest that different weight should be given to e.g. an obscure reference than should be given to a well-cited and generally known reference.
In Allergan Inc v Apotex Inc, 2022 FC 260, the Federal Court affirmed that a document that would not have turned up in a “reasonably diligent search” can indeed be considered as part of the prior art mosaic. However, the likelihood of a skilled person locating such a document is relevant to the obvious to try test and the question of whether a skilled person would have thought to combine the document with other prior art. A similar conclusion was also reached in Google LLC v Sonos, Inc, 2022 FC 1116.
Simultaneous invention is not determinative of obviousness – Patent Act, Section 28.3
The inventor’s course of conduct in arriving at the subject matter of a patent is relevant to the obviousness inquiry. This is exemplified in the obvious-to-try analysis outlined by the Supreme Court of Canada in Apotex v Sanofi-Synthelabo (“Sanofi”), 2008 SCC 61, which asks e.g. what the extent, nature and amount of effort required to achieve the invention was.
However, does the fact that two inventors simultaneously arrived at the same invention establish that the invention was obvious? In Betser-Zilevitch v Petrochina Canada Ltd, 2022 FCA 162, the Federal Court of Appeal confirmed that simultaneous invention does not necessarily indicate obviousness. Holding otherwise would disregard the possibility that the simultaneous inventor may themselves have exercised inventive ingenuity.
Infringement – Patent Act, Section 42
Section 42 of the Patent Act provides a patentee with the “the exclusive right, privilege and liberty of making, constructing and using the invention and selling it to others to be used”. A party may infringe a patent directly, i.e. by making, constructing and using the patented invention or selling it to others to be used, or indirectly, by inducing others to infringe the patented invention. To establish that a party induced another to infringe, it must be established that:
- The acts of infringement must have been completed by the direct infringer;
- 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; and
- The influence must be knowingly exercised by the inducer; in other words, the inducer knows that this influence will result in the completion of the acts of infringement.
In 2022, the Federal Court not only further elaborated what constitutes infringement and the requirements for inducing infringement, it also left the door open for pleadings arising from forms of divided infringement.
When does a product monograph induce infringement?
In Janssen Inc v Apotex Inc, 2022 FC 107, the Federal Court found that Apotex would not directly infringe Janssen’s patent claims to use, simultaneously, separately, or over time, of macitentan and a PDE5 inhibitor for treating a disease involving vasoconstriction through its production and sale of APO-MACITENTAN, a generic prescription medication containing 10 mg of macitentan, but that it would induce infringement through its product monograph for APO-MACITENTAN. The Court found that prescribing physicians will review the information in the APO-MACITENTAN product monograph, which included a clinical trial called the SERAPHIN trial, a landmark study showing that both monotherapy with macitentan and combination therapy with macitentan and a PDE5 inhibitor was effective in pulmonary arterial hypertension (PAH) patients, and rely on that information before prescribing APO-MACITENTAN.
The Federal Court also found liability for inducing infringement based on a product monograph in Janssen Inc v Pharmascience, 2022 FC 62 and Janssen Inc v Apotex Inc, 2022 FC 107 (a further discussion of which can be found in our February 25, 2022 article), despite the fact that Apotex and Pharmascience had sought limited approval for their products and assertions that the product monographs did not explicitly instruct a physician to prescribe the products in an infringing manner. The decision in Janssen Inc v Apotex Inc, 2022 FC 107 has been appealed (A-36-22).
For a further discussion of the Federal Court’s decision in Janssen Inc v Apotex Inc, which Apotex has appealed (A-131-22), please see our July 20, 2022 article.
What is the significance of a label?
Someone may manufacture a product that is capable of being used by another to infringe a patent. For example, a company may manufacture a component of a claimed combination. In such cases, infringement by inducement may be found where the manufacturer actively encouraging consumers to assemble infringing combinations.
This was the case in Angelcare Canada Inc v Munchkin Inc, 2022 FC 507, where the evidence established that Munchkin’s business model was to use the patentee’s well-established Diaper Genie pails in order to sell their own refills, which were built specifically to fit in the pails and, at least for a period of time, Munchkin did not sell any pails compatible with their own refills. In addition, the labels affixed to the Munchkin refills unmistakably encouraged end-users to assemble combinations that infringed the patents-in-suit.
Common design, infringement by attribution, and infringement by agency
In Rovi Guides, Inc v Videotron Ltd, 2022 FC 981 and Rovi Guides, Inc v BCE Inc, 2022 FC 979, the Federal Court refused appeals from orders dismissing motions to strike allegations of infringement by “common design,” “infringement by attribution” and “infringement by agency” as disclosing no reasonable cause of action. While neither decision accepts that any of these concepts are necessarily valid causes of action, they leave the door open for a court subsequently considering the issue to make such a determination.
Joint and several liability
Where one corporation is controlled by another to the extent that they operate as a unit, in certain circumstances, a corporation that does not infringe or induce infringement may still be jointly and severally liable with a corporation that does, for example where the non-infringing corporation benefits from the infringement (see, Weatherford Canada Ltd v Corlac Inc, 2010 FC 602, aff’d 2011 FCA 228).
In UPL NA Inc v AgraCity Crop & Nutrition Ltd, 2022 FC 1422, the Court rejected an argument that one of the defendants, NewAgco, should be found jointly and severally liable with another, AgraCity, based on the established evidence that:
- NewAgco is the registrant with Health Canada of the herbicide products at issue (marketed under the name HIMALAYA) and is responsible for the manufacture of the product from Health Canada’s perspective;
- NewAgco’s name appears on the end-use label for the HIMALAYA products; and
- NewAgco and AgraCity are effectively run as a single unit.
The Court noted that there is no evidence that NewAgco is the parent company of AgraCity, owned all the shares of AgraCity and exercised control over the operations of AgraCity, that the operations of the defendants are integrated, or that NewAgco benefited from the infringement. Agracity has appealed the decision (A-248-22).
A first look at Canada’s revised prior use defence – Patent Act, Section 56
Canada has long provided certain rights to prior users of an invention that subsequently becomes the subject matter of a patent. Revisions to the Patent Act that came into force late in 2018 brought about significant changes to the provisions related to prior user rights. We previously wrote about the revisions shortly after they came into force. The decision of the Federal Court in Kobold Corporation v NCS Multistage Inc, 2021 FC 1437 provided a first glimpse of the scope of protection now afforded to a prior user.
The decision outlines that the provisions of current section 56 of the Patent Act: (1) apply to a wider set of circumstances than simply the sale or use of a physical product, including the use of a patented process; (2) protect the commission of “the same act” that would have constituted infringement rather than only the sale or use of the “specific” physical manifestation of the invention; and (3) protect both those persons who committed an infringing act prior to the claim date and those who “made serious and effective preparations to commit such an act.” The decision also clarifies that subsections 56(6) and 56(9) are intended to protect third parties, not those individuals protected by subsection 56(1).
The decision provides a framework to be followed in determining whether a defence under subsection 56(1) is available:
- Determine whether the acts being performed before and after the claim date are identical (other than wholly non-functional changes, such as colour). If they are, the defence is available.
- If the acts are not identical, determine whether the acts infringe the patent, and if they do, which claims. If they infringe different claims, the defence is not available.
- If the pre- and post-claim date acts are not identical but infringe only the same claims, determine whether the changes relate to the inventive concept of the patent. If the changes relate to the inventive concept, the defence is not available.
The Patent Act and the Patented Medicines (Notice of Compliance) Regulations (PM(NOC) Regulations) provide remedies for a patentee who is successful in establishing that their patented invention has been or would be infringed, and for the manufacturer of a generic drug that is inappropriately delayed from entering the Canadian marketplace. The scope of remedies that may be relied upon, how such remedies are to be determined and when certain remedies are available were all considered by Canadian courts in 2022, with the Supreme Court even weighing in on the issue.
Springboard profits are legally permissible
In Nova Chemicals Corp v Dow Chemical Co, 2022 SCC 43, the Supreme Court affirmed the largest reported Canadian patent infringement award in history. During the liability phase, the Federal Court found that Nova’s SURPASS polymers infringed Dow’s Canadian Patent No. 2,160,705. The Court awarded Dow various remedies, including an election between damages and an accounting of profits (Dow elected the latter), reasonable compensation for infringement that occurred between the publication date of the ‘705 Patent and its date of issuance, interest, and costs. During the quantification phase, the Federal Court ordered Nova to disgorge profits and other relief totalling approximately $645 million.
Before the Supreme Court were two issues regarding the determination of Nova’s profits: (1) should Nova be entitled to deduct the “market value” of ethylene, a component of the infringing polymers, instead of the actual cost of ethylene to Nova?; and (2) are springboard profits, “profits that arise post‑patent‑expiry but that are causally attributable to infringement of the invention during the period of patent protection”, available in Canada?
The majority of the Supreme Court found that the Federal Court did not err in declining to deduct a “market value” of ethylene instead of Nova’s actual cost, and that an award of springboard profits is legally permissible. The majority also established a three-step approach for calculating an accounting of profits:
Step 1: calculate the actual profits earned by selling the infringing product — i.e., revenue minus (full or differential) costs.
Step 2: determine whether there is a non-infringing option that can help isolate the profits causally attributable to the invention from the portion of the infringer’s profits not causally attributable to the invention — i.e., differential profits. It is at this step that judges should apply the principles of causation.
Step 3: if there is a non-infringing option, the court should subtract the profits the infringer could have made had it used the non-infringing option from its actual profits, to determine the amount to be disgorged.
The dissenting Judge agreed that an award of springboard profits is legally permissible, but would have calculated the award differently.
For a further discussion of the Supreme Court of Canada’s decision in Nova Chemicals Corp v Dow Chemical Co, please see our November 18, 2022 article.
Can a delay in prosecution disentitle a patentee from an accounting of profits?
The Patent Act provides for several remedies for a patentee whose patent has been infringed, including: (1) reasonable compensation for any loss attributed to the infringement between the date on which the patent application was laid-open for public inspection and the date of grant of the patent (subsection 55(2)), (2) damages sustained by reason of the infringement (subsection 55(1)), and (3) an accounting of the infringer’s profits (paragraph 57(1)(b)).
Damages and an accounting of profits are post-grant remedies that are available in the alternative, with damages directed to compensating the patentee for losses attributable to the infringement and an accounting of profits directed to requiring the infringer to disgorge all profits causally attributable to infringement. Unlike damages, an accounting of profits is an equitable remedy.
In Rovi Guides, Inc v Videotron Ltd, 2022 FC 874, the Federal Court found (in obiter as the patents at issue were all found to be invalid) that Rovi’s delay in prosecution of its patents was a relevant consideration in determining whether Rovi could elect an accounting of profits. The Court ultimately concluded that the appropriate remedy would be a reasonable royalty. See, also, Rovi Guides, Inc v BCE Inc, 2022 FC 1388. Rovi Guides has appealed both decisions (A-186-22 and A-233-22).
The remedies available to a generic are limited under the PM(NOC) Regulations
In Apotex Inc v Eli Lilly Canada Inc, 2022 ONCA 587, the Court of Appeal for Ontario affirmed a decision of the Ontario Superior Court holding that the Patent Act and its Regulations are “a complete code” for the purposes of determining whether damages are available to a generic manufacturer previously denied a NOC by virtue of a patent that is subsequently invalidated.
Apotex had claimed treble damages under both the Statute of Monopolies, R.S.O. 1897, Ch. 323 and Statute of Monopolies, 21 Jac. 1, c. 3 (the English statue first enacted in 1624 upon which the Ontario Statute is based), disgorgement of Eli Lilly’s profits, damages for false or misleading claims under s. 7 of the Trademarks Act, and damages for the common law tort of civil conspiracy because it was kept out of the market from the time its ANDS for a generic version of Olanzapine was approved (June 2006) until the date the patent at issue was found invalid in an unrelated proceeding (October 2009). The Court of Appeal found that Apotex, who had voluntarily participated in the PMNOC regime, was not entitled to remedies beyond s. 8 of the PM(NOC) Regulations. Apotex has sought leave to appeal to the Supreme Court of Canada. (Docket 40420).
Who is a “second person”? Patented Medicines (Notice of Compliance) Regulations, Section 5(1)
In AbbVie Corporation v Canada (Health), 2022 FC 1209, the Federal Court considered whether the Minister of Health’s decision that JAMP, who sought approval for SIMLANDI—a biosimilar of AbbVie’s HUMIRA (adalimumab)—in three presentations that did not correspond to presentations marketed by AbbVie in Canada at the time JAMP submitted its New Drug Submission, was not a ”second person” captured by the Regulations was reasonable.
The 40 mg/0.4 mL and 80 mg/0.8 mL presentations of HUMIRA that were relied upon by JAMP in submitting its NDS were not marketed in Canada when the NDS was filed. The Federal Court concluded that the Minister’s interpretation of the Regulations as “applying only to a DIN-specific version of a drug that is marketed in Canada was reasonable, particularly considering the statutory objective of providing a patent enforcement mechanism only in relation to products that are in fact available to Canadians.”
For a further discussion of the Federal Court’s decision in AbbVie Corporation v Canada (Health), please see our August 29, 2022 article. AbbVie has appealed the decision (A-203-22).
A second person is not limited to a counterclaim based on asserted claims – Patented Medicines (Notice of Compliance) Regulations, Section 6(3)
In Janssen Inc v Apotex Inc, 2022 FCA 184, the Federal Court of Appeal found that “the Regulations permit, in the context of an action under subsection 6(1) thereof, a counterclaim on claims not asserted in the action”. Thus, it was permissible for the Federal Court to permit a counterclaim under subsection 6(3) by the second person, Apotex in this case, that included non-asserted claims. The Federal Court of Appeal limited its opinion to whether such a counterclaim is permitted with leave, expressly noting that ” whether a defendant in an action under subsection 6(1) may make such a counterclaim by right” (underscoring in decision) would be left for another day.
When are summary proceedings appropriate? – Civil procedure
The Federal Courts Rules allow a party to bring a motion for summary judgment or summary trial on all or some of the issues raised in the pleadings at any time after the defendant has filed a defence but before the time and place for trial have been fixed (Rule 213). Such proceedings are thought to help conserve scarce judicial resources and improve access to justice. A motion for summary judgment will be granted where “the Court is satisfied that there is no genuine issue for trial with respect to a claim or defence” (Rule 215), while a motion for a summary trial may be granted where “there is sufficient evidence for adjudication” (Rule 216). In contrast to summary judgment, which relies entirely on a paper record, summary trial provides greater flexibility for a Court, allowing e.g. for experts or witnesses to be cross-examined during the summary trial.
Historically, motions for summary judgment or trial were rarely utilized in patent cases. However, the Federal Court has recently shown a shift to granting motions for summary judgment or summary trial, suggesting that summary judgment and summary trial are now viable options to resolve patent disputes more expeditiously while avoiding the cost of a full patent trial. Nevertheless, Canadian courts have made clear that such motions will not always be granted, and clarified when summary judgment and summary trial will be appropriate in patent infringement actions.
In GEMAK Trust v Jempak Corporation, 2022 FCA 141, the Federal Court of Appeal considered whether the Federal Court erred in granting summary judgment in a patent infringement action. The Court found that, among other errors, it was a palpable and overriding error on the part of the Federal Court to make credibility findings concerning an expert based solely on a transcript of the expert’s testimony; such findings should only have been made with the assistance of viva voce evidence.
In Google LLC v Sonos, Inc, 2021 FC 1462, the Federal Court held that the fact that the same parties litigating a corresponding foreign patent with identical claims to those at issue in Canada had the foreign litigation voluntarily dismissed was not a sufficient reason to grant summary judgment. The Court acknowledged that conclusions reached in foreign judgments relating to, for example claim construction, are not determinative of the same issues in Canada even where the claims are the same, as “different principles are applicable under US and Canadian law”.
Several other decisions were arrived at by way of summary trial, including:
- Mud Engineering Inc v Secure Energy (Drilling Services) Inc, 2022 FC 943, where the Court found that summary trial was appropriate since it was “neither necessary nor appropriate to assess the Disputed Patents’ validity as part of the present Motion as the sole issue is the ownership issue”. Mud Engineering has appealed the decision (A-177-22).
- Janssen Inc v Pharmascience Inc, 2022 FC 62 and Janssen Inc v Apotex Inc, 2022 FC 107, where the Court found that there were sufficient facts and evidence for the adjudication of whether Apotex’s or Pharmascience’s product monograph would induce infringement. In Janssen Inc v Apotex Inc, the Court expressly noted that any disputes concerning expert and witness credibility could be addressed through the viva voce testimony provided in the matter, while in Janssen Inc v Pharmascience Inc the Court noted that any issues of credibility and conflicting evidence could be determined on the written record before the Court.
Where does the burden for the determination of the merits of a summary trial lie? – Civil procedure
The Federal Court considered several motions for summary trial in patent matters in 2022. Although it appears settled that the moving party has the burden of establishing that it is appropriate to proceed by way of a summary trial, there does not appear to be consensus as to where the burden lies once it has been determined that summary trial is appropriate.
In Janssen Inc v Pharmascience Inc, 2022 FC 62, and Janssen Inc v Apotex Inc, 2022 FC 107, the Federal Court noted that the burden for the determination of the merits of the matter to be decided (e.g. infringement) by way of a summary trial reflects that of the underlying action.
By contrast, in Mud Engineering Inc v Secure Energy (Drilling Services) Inc, 2022 FC 943, the Federal Court, relying on ViiV Healthcare Company v Gilead Sciences Canada, Inc, 2021 FCA 122, reached the conclusion that the burden of proof on the summary trial pertains to what is raised in the motion, not to what is raised in the underlying action. This was despite acknowledging that Justice Manson, who decided ViiV Healthcare Company v Gilead Sciences Canada, Inc, 2020 FC 486 (the decision under appeal in 2021 FCA 122), reconsidered the issue and reached the opposite conclusion in Janssen Inc v Pharmascience Inc, 2022 FC 62.