Patent law: 2015 year in review

Remedies in patent litigation
Non-infringing alternative defence introduced into Canadian patent law

A successful patentee in a patent infringement action is entitled to monetary compensation in relation to acts of infringement. In this regard, the patentee may elect to recover either its damages or the profits made by the infringer as a result of the infringement. 

With respect to damages, the court will determine the financial harm suffered by the patentee as a result of the infringement. In other words, the court will consider the position that the patentee would have been in but for the infringer’s infringement. Traditionally, compensatory damages for a patentee mainly comprise the patentee’s lost profits on infringing sales that it can prove (on a balance of probabilities) it would have made had the infringing product not been on the market, and a reasonable royalty for all other infringing sales. Until recently, the issue of damages was determined without factoring in what the infringer could or would have done differently. That is, the court’s damages analysis focused solely on the harm suffered by the patentee due to the infringer’s acts of infringement. This is in contrast to an accounting of profits analysis, which may take into account any non-infringing alternatives available to an infringer (Monsanto Canada Inc v Schmeiser, 2004 SCC 34 at para 102).

The law of damages changed in 2015 when the Federal Court of Appeal issued its decision in Apotex Inc v Merck & Co, Inc (2015 FCA 171). Before Apotex, hypothetical non-infringing alternative (NIA) scenarios of a defendant were not considered when calculating patent infringement damages. However, Apotex provided that, in certain situations, an infringer may now argue that it had an NIA available to it such that, for example, the infringer would have in any event made the sales, thereby defeating a patentee’s claim for lost profits.

In order for an infringer to rely on the NIA defence successfully, various minimum criteria must be met, including that, at the time of infringement, the infringer had an adequate supply of product such that it could have sold the non-infringing alternative, and the infringer would have actually sold the non-infringing alternative product.

Although Apotex changed the law of Canada by introducing the NIA defence, Apotex was ultimately not successful in its appeal of the lower court decision, which granted Merck damages totalling a staggering $119 million plus interest (for further details please see "Court grants largest patent infringement damages award in Canadian history"). Instead, the Federal Court of Appeal held that Apotex neither could nor would have sold a non-infringing alternative product. 

Leave to appeal to the Supreme Court has been sought by Apotex.

Cases addressing damages under Section 8 of Patented Medicines (Notice of Compliance) Regulations
The year 2015 saw further setbacks for generics under Section 8 of the Patented Medicines (Notice of Compliance) Regulations in their attempts to recover innovator profits rather than their own loss suffered. One case addressing this issue was Apotex v Eli Lilly (2015 ONCA 305), where the Ontario Court of Appeal held that a generic cannot make a claim for innovator profits under the doctrine of unjust enrichment.

Apotex argued that it was kept off the market because of a proceeding under the regulations commenced by Lilly in which Lilly was ultimately unsuccessful. Section 8 of the regulations states that a generic can recover any “loss suffered” from an innovator in this situation. Apotex pursued a claim in the Ontario courts under the doctrine of unjust enrichment. The three-part test to make out a claim for unjust enrichment requires:

  • an enrichment of the defendant;
  • a corresponding deprivation of the plaintiff; and
  • the absence of any juristic reason for the enrichment.

The Ontario Court of Appeal held that Apotex could not recover Lilly’s profits as Apotex suffered no corresponding deprivation. As Apotex had every right to claim its loss, any difference between this “loss suffered” and Lilly’s actual profits was not a deprivation to Apotex.

Apotex further argued that this potential difference between Lilly’s profits and Apotex’s loss should nonetheless be recoverable as they were “profits of wrongdoing”. Rejecting this argument, the Ontario Court of Appeal held that Apotex was an inappropriate party to make this claim, as Lilly had no equitable duty to Apotex and was not exploiting Apotex to its advantage.

Apotex has sought leave to the Supreme Court.

Low v Pfizer (2015 BCCA 506) was a decision of the British Columbia Court of Appeal. The case involved a potential class action on the basis that Pfizer overcharged the public for its Viagra product through asserting its ultimately invalid patent covering the use of sildenafil for the treatment of erectile dysfunction in proceedings under the Patented Medicines (Notice of Compliance) Regulations

The most interesting aspect of Low is the British Columbia Court of Appeal’s use of the 'complete code' argument to dismiss the class action. In particular, it was held that the Patent Act and the related legislation (eg, the Patented Medicines (Notice of Compliance) Regulations) constitute a complete code that “forecloses parallel civil actions”. 

Finally, the Supreme Court dismissed Sanofi's appeal in the Ramipril Section 8 damages case (2015 SCC 20). The Supreme Court endorsed the reasons of the Federal Court of Appeal. 

Canada and the Trans-Pacific Partnership
The Trans-Pacific Partnership (TPP) is a trade agreement involving a dozen Pacific region countries that, collectively, make up 36% of global gross domestic product (GDP) (or close to $30 trillion in GDP). The TPP Agreement addresses trade matters in relation to numerous industries, as well as certain IP laws of TPP countries.

Specifically with respect to patents, the TPP Agreement is notable in that it requires Canada to implement patent term extension in situations where there have been unreasonable delays (ie, delays of more than five years from filing or three years from a request for examination). Making patent term extension available to patentees in Canada would bring Canada more in line with countries such as the United States, which already has a regime for term extension. The TPP Agreement also provides for patent term extension for pharmaceutical patent holders in situations where a patent was affected by delays related to regulatory or marketing approvals, as well as other pharmaceutical-specific provisions addressing such matters as data protection and biologics. Many of the patent-related provisions of the TPP Agreement are already consistent with Canadian law and/or proposed changes to Canadian law (based on, for example, the Comprehensive Economic and Trade Agreement between Canada and the European Union).

The TPP Agreement has not been signed or ratified by Canada and will be the subject of consultation in Canada. If ratification occurs, it will not be for some time. 

Law regarding patent validity
The Federal Court continued to see a significant number of cases with patent validity at issue. Rather than discussing every decision, the following briefly canvasses some of the interesting legal findings made, as well as the special case of Amgen.

The courts continued to consider the tie between disclosure and utility. Justice Rennie’s 2014 Esomeprazole decision that there cannot be a disclosure requirement in cases of a sound prediction (except possibly for claims to a new use for an old compound) was cited with approval in Idenix v Gilead (2015 FC 1156). Further, on appeal, Rennie’s decision was upheld; however, the Federal Court of Appeal did not consider the disclosure requirement for sound prediction (2015 FCA 158).

The interplay between disclosure and utility also arose in the context of demonstrated utility. Early in the year, an obiter statement in Laboratoires Servier v Canada (2015 FC 108) suggested that a patent must make reference to a study that demonstrates any promise made. Later in the year, Justice Gleason held in Eli Lilly v Apotex (2015 FC 1016) that there is no requirement to provide evidence of utility in a patent.

Regarding obviousness, the decision in Eli Lilly v Mylan (2015 FCA 286) was released in December 2015. In recent years, several Federal Court decisions considered whether something was obvious to try by asking whether the skilled person had good reason to pursue predictable solutions or solutions that provide a “fair expectation of success”. In Eli Lilly v Mylan Justice Dawson held that the “fair expectation of success” standard is inappropriate for determining whether an invention was obvious to try. Rather, Dawson framed the appropriate test as being whether the claimed invention is “more or less self-evident”.

The Federal Court of Appeal called for clarification in two areas of the law in Cobalt v Bayer (2015 FCA 116). One issue was the standard of review for construction. In obiter, Justice Stratas's majority opinion questioned whether a correctness standard is appropriate in considering construction in cases where the expert evidence played a significant role in informing the trial judge’s construction. In particular, Stratas discussed the artificiality required in “cleaving off” aspects of claim construction that flow from the trial judge’s appreciation of expert evidence from the words of the claim per se. Similar comments were made by Stratas in ABB Technology AG v Hyundai Heavy Industries Co, Ltd (2015 FCA 181). Ultimately, the court applied the correctness standard and left the question of the proper standard to be dealt with by the Supreme Court of Canada.

Cobalt v Bayer also called for a thorough review of the method of medical treatment doctrine under Canadian law given that the statutory basis for the exception – the Patent Act’s former Section 41(1) – had been repealed.

Finally, the Amgen Canada v Apotex (2015 FC 1261) decision was the first Federal Court decision pertaining to a biologic under the Patented Medicines (Notice of Compliance) Regulations. The decision considered, among other things, the validity issues of anticipation and obviousness.

Apotex’s anticipation allegation was rejected because the prior art publication in question did not contain the same amino acid sequence as was claimed; in particular, the amino acid sequence in the prior art document did not begin with the amino acid MET as was required by the asserted claim.

However, the same prior art was relied on by Apotex in its successful obviousness allegation. In coming to this conclusion, Justice Hughes noted that the work conducted by the inventors was “skilled work” as opposed to “creative work”, and that the prior art document provided a direct motivation to the skilled person to undertake the work that the Amgen inventors performed.

Pharmaceutical regulatory update
Data protection decisions

The year 2015 was relatively busy in terms of data protection, with two decisions being issued by the Federal Court. In Photocure ASA v Canada (2015 FC 959) the court upheld the minister of health’s denial of data protection to Cysview, an optical imaging agent designed to enhance detection of bladder cancer. In doing so, the court found that the standard of review was reasonableness. This case is the first data protection judicial review to apply such a standard; all prior cases have applied the standard of correctness. The court distinguished the established line of authority on the basis that questions of statutory interpretation were raised in those cases, while this case dealt merely with a question of fact.

In the second data protection decision of 2015, Hospira Healthcare Corporation v Canada (Health) (2015 FC 1205), the Federal Court applied the established standard of correctness. The Photocure decision was confidential at the time when Hospira was released, and therefore these two decisions stand in contrast to one another. Given the established line of authority in favour of a correctness standard, Photocure may simply be an outlier.

Notwithstanding the higher standard of correctness, the court in Hospira upheld the minister’s application of data protection to post-filing amendments to a drug submission. That is, the court confirmed that if a post-filing amendment makes a direct or indirect reference to an innovative drug subject to data protection, then the data protection provisions apply and the drug under review cannot be approved until the data protection term expires.

Patent Register: rules on product specificity relaxed
Innovator pharmaceutical companies benefitted from a relaxing of the strict product specificity requirements for listing pharmaceutical patents on the Patent Register pursuant to the Patented Medicines (Notice of Compliance) Regulations. As a result of prior Federal Court decisions, a patent could only be listed on the Patent Register against a drug with multiple medicinal ingredients if the patent contained a claim specifying all of the medicinal ingredients. If one medicinal ingredient was missing, the patent was not listable. In 2015 the Patented Medicines (Notice of Compliance) Regulations were amended to specifically allow to be listed patents claiming only one out of multiple medicinal ingredients in the approved drug (see new Section 4(2.1)).

The Federal Court of Appeal in Eli Lilly Canada Inc v Canada (Minister of Health) (2015 FCA 166) also relaxed the product specificity requirement. Before this decision, all medicinal ingredients in the approved drug had to be specifically named in the claim; it was insufficient if the scope of the claim, as construed, included all medicinal ingredients. The Federal Court of Appeal in Eli Lilly changed this analysis, stating that claims need not specifically name all medicinal ingredients; the claim, as construed, must simply match the medicinal ingredients in the approved product.

The drug at issue in this case was trifexis (spinosad and milbemycin oxime). The claims at issue claimed oral formulations containing spinosad, where oral formulation was defined in the disclosure as potentially including many other known parasitic treatments such as “milbemycins”. The Federal Court of Appeal found that the claims, as construed, claimed an oral formulation of spinosad and milbemycin oxime, and therefore the patent was listable.

Patented Medicines Prices Review Board has jurisdiction over generics
In Canada (Attorney General) v Sandoz Canada Inc (2015 FCA 249) the Federal Court of Appeal upheld the board’s decision to retain jurisdiction over non-patent owners that sell patented medicines pursuant to a licence or authorisation from the patent owner. Therefore, generic pharmaceutical companies Sandoz and ratiopharm were within the board’s jurisdiction.

The board also withstood a constitutional challenge to the extent that the board retains jurisdiction over non-patent owners. The challenge from Sandoz and ratiopharm alleged that the board’s existing regime is one of pure price regulation and therefore intrudes into the provinces’ constitutional jurisdiction over property and civil rights. The Federal Court of Appeal dismissed the challenge, finding that there is an integral connection between the board and patents. Specifically, the board seeks to prevent the harm arising by reason of the existence of a patent pertaining to the medicine being sold. 

Leave to appeal to the Supreme Court has been sought by Sandoz and ratiopharm.

Competition Bureau setting its sights on patent matters
In recent years the Competition Bureau has shown a greater interest in IP matters. Most recently, the bureau released its Intellectual Property Enforcement Guidelines (IPEGs) in draft form for public consultation. The draft IPEGs address, among other things, when and how the bureau will investigate certain conduct involving intellectual property. In this regard, the draft IPEGs provide guidance regarding the following:

  • Settlements under the Patented Medicines (Notice of Compliance) Regulations – where an innovator pharmaceutical company settles with a generic pharmaceutical company with respect to early (pre-patent expiry) market entry by the generic, the bureau may investigate situations involving any payments for the purpose of delaying generic entry. Factors such as the fair market value of the generic’s goods, the innovator’s potential Section 8 damages exposure and the innovator’s litigation costs may be considered by the bureau to determine the reasonableness of any payments. In limited situations, the bureau may investigate for criminal conspiracy violations, particularly where there is evidence that the intent of the payment was to fix prices, allocate markets or restrict output.
  • Conduct involving patent assertion entities (PAEs) – PAEs that indiscriminately send cease and desist letters, or that are indifferent as to whether the allegations are misleading, may face liability for false or misleading representations and/or deceptive marketing practices.
  • Conduct involving standard-essential patents – where an entity fails to disclose patents that are essential during a standard-setting process (ie, “patent ambush”) or where fair, reasonable and non-discriminatory licensing commitments are not respected, liability under the abuse of dominance provisions of the Competition Act may result.

At present, the IPEGs have not been finalised. The public consultation period ended on August 10 2015.

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