Canadian patent law: 2017 year in review

2017 was a busy year in Canadian patent law. The contentious Promise Doctrine was rejected by the Supreme Court of Canada in AstraZeneca v Apotex, the largest monetary judgment for patent infringement in Canadian history was awarded in The Dow Chemical Company v Nova Chemical, the Patented Medicines (Notice of Compliance) Regulations and the Patent Rules were significantly amended, and Bill C-30 introduced an ability to seek patent term restoration through a "Certificate of Supplementary Protection" in certain circumstances.

This article summarizes these and other noteworthy decisions and developments in Canadian patent law from 2017.

Notable cases and decisions

Promise Doctrine Abolished - AstraZeneca v Apotex

The Supreme Court of Canada ("SCC") involved itself in matters of substantive patent law for the first time since 2012 in AstraZeneca v Apotex ("AstraZeneca"[1]). The SCC found that the so-called Promise Doctrine is incongruent with the Patent Act's utility requirement, and thus that it provided an incorrect basis on which to determine whether an invention met the required threshold of being "useful".

The Promise Doctrine was found to be excessively onerous for two reasons. First, it required that the standard of utility be measured as against "promise(s)" expressed in the patent in a manner that conflated the s. 2 utility requirement with the s. 27 disclosure requirement. The SCC confirmed the holding from Consolboard v MacMillan Bloedel[2] that utility and disclosure are separate requirements, and that any "use" disclosed by virtue of s. 27(3) need not be demonstrated or soundly predicted in order to meet the s. 2 "utility" requirement.

Second, Rowe J., writing for a unanimous panel, found that the Promise Doctrine went beyond the scope of the Patent Act as, in situations where a patent contained multiple "promises", it required that each promise be fulfilled in order for a patent to be valid. Rowe J. found that "a single use makes a subject-matter "useful" under s. 2 of the Patent Act.

The SCC set out a new test for utility after its discussion and rejection of the Promise Doctrine. The two-part test set out by the SCC requires courts to:

1. 1.Identify the subject-matter of the claimed invention; and
2. 2.Ask whether that subject-matter is useful, in that it is capable of even a scintilla of any practical purpose that is related to the nature of the subject-matter identified in question 1.

Thus, following AstraZeneca, patents whose claimed subject-matter were demonstrated or soundly predicted as of the filing date to have any scintilla of utility connected to the subject-matter of the claimed invention will meet the s. 2 utility requirement. The SCC found the patent at issue in AstraZeneca to be useful, overturning the trial judge's finding on point (which was based on the Promise Doctrine).

Failed Attempts to Revive the Promise Doctrine - Dasatinib FCA and Desvenlafaxine

The Federal Court ("FC") and Federal Court of Appeal ("FCA") were presented with arguments in separate proceedings as to the proper application of AstraZeneca following its release. In each instance, the lower courts read AstraZeneca contextually and rejected arguments that sought to revive the Promise Doctrine.

Bristol-Myers Squibb v Apotex ("Dasatinib FCA")[3] was an appeal brought by Bristol-Myers after an allegation of inutility brought by Apotex succeeded before the FC in a decision pre-dating AstraZeneca.[4] The claim at issue, claim 27, was to the compound known as dasatinib, which is used in the treatment of a type of leukemia. The FC found that the patent at issue made promises that dasatinib would treat a range of ailments despite the bare nature of the claim, and that these promises were not all demonstrated or soundly predicted as of the filing date.

AstraZeneca was released before the FCA issued its decision. Bristol-Myers argued that the pre-filing date demonstration that dasatinib inhibited certain enzymes in in vitro tests satisfied the scintilla threshold set out in AstraZeneca. Apotex countered by arguing that the subject-matter of claim 27 was to the potential therapeutic uses of dasatinib, and that in vitro kinase inhibition "cannot constitute a use at law" as it was only a "laboratory curiosity" and not capable of a practical purpose. The FCA disagreed, holding that the in vitro kinase inhibition was a useful discovery that met the "minimal utility requirements" put in place in AstraZeneca. Bristol-Myers succeeded on its appeal.

Pfizer v Apotex[5] (Pristiq Apotex) and Pfizer v Teva[6] (Pristiq Teva) were applications for orders of prohibition that were heard before but decided after AstraZeneca's release. The FC invited the parties to make submissions as to the impact of AstraZeneca following the hearing in the Pristiq matters.

The claims at issue were found to meet the s. 2 utility requirement following an application of AstraZeneca in both cases. Notably, Apotex in its supplemental submissions also argued that the patent at issue was invalid because it contained "overpromises", which Apotex argued were identified as a "mischief" in AstraZeneca that would lead to the invalidation of a patent pursuant to s. 27(3). Brown J. dismissed Apotex's interpretation of AstraZeneca, holding that its argument resembled the old Promise Doctrine. Brown J. ruled that, had the SCC intended to say that the old Promise Doctrine did not apply under s. 2 but that it could be used to invalidate patents under s. 27(3), the SCC could have stated such an intention, but that it did not.

The $644,623,550.00 Patent Infringement Judgment - Dow v Nova

There were two 2017 decisions issued in the ongoing patent dispute between The Dow Chemical Company and Nova Chemicals that related to the compensation owed to Dow by Nova's infringement of Dow's valid patent. The decisions are notable because they set a record high monetary award for patent infringement in Canada - approximately $644 million, plus interest.

In the first of these decisions[7] the Court set various parameters for the parties to calculate the monetary award. Pre-patent grant "reasonable compensation" was awarded as an 8.8% reasonable royalty. Dow elected for an accounting of profits for compensation post-patent grant, and the Court found that the "full cost" method of calculating profits was more appropriate than the "differential profits" or "incremental cost" approaches given the circumstances of the particular case. Further, "springboard profits" to compensate for the infringer's artificially enlarged market share upon patent expiry were awarded to Dow for a period of 20-months post-expiry.

The parties were unable to agree on all facets of the calculation following the first decision, requiring the Court to resolve an issue relating to currency conversion and two calculations pertaining to Nova's fixed costs. The second decision[8] addressed these questions and set out the final $644,623,550 plus interest award to Dow. Previously, decisions in the $100-125 million range represented the largest awards in Canadian history (Merck v Apotex, 2013 FC 751 and Lilly v Apotex, 2014 FC 1254).

FCA Considers the Law of Obviousness - BMS v Teva and Ciba Specialty Chemicals v SNF

Two FCA decisions in 2017 were notable for their comments on the obviousness test as established in Apotex v Sanofi-Synthelabo (Sanofi SCC)[9]. In Sanofi SCC, a four-part test for obviousness was established, which included an inquiry into what the "inventive concept" of a claim in question is.

In the first decision, BMS v Teva[10], the FCA held that the "inventive concept" is akin to "the solution taught by the patent". In doing so, and in acknowledging that there is a lack of clarity in the law concerning what constitutes the "inventive concept", the FCA found based on the facts of this particular case no difference between the solution taught in the patent in suit and the prior art. The FCA also found that, in any event, had there been any difference between the prior art and the solution taught by the patent, such difference would have been bridged by the skilled person based on the common general knowledge. Furthermore, it would have been "obvious to try" the claimed invention based on the findings that it was quickly and easily discovered and there was motivation to discover it. Therefore, the obviousness allegation was justified.

In the second decision, Ciba Specialty Chemicals v SNF[11], the FCA again addressed the question of the "inventive concept". In this case, the FCA explicitly noted that the "'inventive concept' remains undefined", which has led to "considerable confusion [in] the law of obviousness", and invited the Supreme Court "to develop a workable definition of the inventive concept". The FCA went on to comment in some detail regarding aspects of the four-part obviousness analysis, including what courts should be referring to at steps 3 and 4 (i.e., the "state of the art" or the "prior art", and the "common general knowledge"), and ultimately concluded the patent in suit was invalid for obviousness. Notably, in concurring reasons, Woods J.A. disagreed with Pelletier J.A. having provided such comments on the obviousness analysis, as neither party had pleaded, raised or briefed the FCA on these issues.

Third Party Funding of Patent Litigation - Seedlings v Pfizer

In Seedlings v Pfizer[12], the Federal Court was asked to approve a litigation funding agreement. Seedlings, with the assistance of a third party funder, had sued Pfizer for patent infringement regarding a medical device. The Court held that: (i) third party funding agreements are protected by at least litigation privilege; (ii) approval of third party funding agreements is outside the Federal Court's jurisdiction such that if approval is desired, a party should go to provincial courts; (iii) litigation funders are bound by the implied undertaking rule; and, (iv) outside of the class action context, "[t]here is no legal or logical basis to extend the requirement of pre-approval" of a funding agreement to the private litigation context. Regarding (iv), the Court specifically noted that "the manner in which [the plaintiff] chooses to fund a litigation it has every right to bring is of no concern to the Court or to the Defendant", and "[t]he Defendant has no legitimate interest in enquiring into the reasonability, legality or validity of [the] [funding] arrangements."

Pursuing a Knowingly Unmeritorious Claim - Mediatube v Bell Canada

Mediatube Corp v Bell Canada[13] was a decision in an action where Mediatube's patent was found to be valid but not infringed. It is most notable for its costs analysis. The plaintiff Mediatube, an alleged non-practicing entity, argued that it should be entitled to costs regardless of the result in the proceeding on the basis that Bell cited 753 prior art references, because Bell provided critical updates to its discovery answers on the issue of non-infringement late in the proceedings, and because Bell disparagingly referred to Mediatube as a "patent troll". Bell argued that it should be entitled to elevated costs because Mediatube dropped all of its non-infringement allegations except for those relating to stand-by utility at trial, and because Mediatube maintained a meritless claim for punitive damages that it dropped during the middle of trial.

Locke J. of the FC found that Mediatube was not entitled to its costs. In particular: (i) Bell narrowed its asserted prior art to a small subset in its expert reports, and Mediatube had no evidence that it faced unwarranted expenses as a consequence of Bell's allegation; (ii) Bell acted in good faith in providing its corrected discovery answers, and Mediatube could not have had a case for non-infringement even before the corrected discovery answers were given; and (iii) the characterization of Mediatube as a "patent troll" was not akin to a fraud allegation, and there was "no objective untruth" to the statement.

Bell was granted its costs at an elevated scale. Bell was awarded its costs plus 50% on the basis that Mediatube pursued what it should have known was an unmeritorious allegation of non-infringement. Bell was further granted solicitor-client costs in respect of Mediatube's punitive damages claim because Mediatube had the information that it needed to know that its allegation was baseless and yet it did not drop the allegation until the middle of trial.

FCA Application of the Supreme Court's Viagra Decision - Teva v Leo Pharma

Teva v Leo Pharma[14] was an appeal by Teva of an order granting Leo's application for an order of prohibition in which Teva argued that the FC Judge made errors in his sound prediction and insufficiency analyses. Of note, Teva argued that the SCC changed the law of sufficiency in its 2012 Teva v Pfizer ("Viagra")[15] decision when it stated that the invention was not sufficiently disclosed because the skilled reader would have to conduct a minor research project to determine which claim is the true invention. Teva argued that this passage from the Viagra decision precluded the ability to consider the use of non-inventive trial and error experimentation in the enablement analysis.

The FCA dismissed Teva's argument. The FCA distinguished Viagra, which dealt with the failure to disclose the "invention itself", with the case at bar, where the question was whether the skilled person could put a properly disclosed invention into practice. The FCA held that the need to use trial and error experimentation "to enable the skilled person to use the invention does not render the disclosure in a patent insufficient".

Pre-grant defects do not invalidate a patent - Apotex v Pfizer

The FCA confirmed in Apotex v Pfizer[16] that an accused infringer cannot rely upon pre-grant administrative errors to invalidate a patent. In this case, the applicant had paid the incorrect final (issuance) fee, and this payment was accepted by the Patent Office such that the patent was granted. Despite the error, the FCA took a contextual rather than literal approach to the Patent Act and found that it would be absurd to invalidate the patent on the basis of the applicant being "a few pennies short".

Bill C-30 - The New PM(NOC) Regulations and Certificates of Supplementary Protection

The EU-Canada Comprehensive Economic and Trade Agreement ("CETA") was long-awaited by the IP bar and IP stakeholders in Canada due to its anticipated consequences. Patent law was most impacted by the modification of the PM(NOC) Regulations (the "New NOC Regulations") and the introduction of Certificates of Supplementary Protection ("CSPs") through amendments to the Patent Rules. The legislative schemes underlying the New NOC Regulations and CSPs were unveiled in July, 2017 and came into force on September 21, 2017.

Changes to the PM(NOC) Regulations

CETA brought about an overhaul of the NOC Regulations. Whereas under the previous NOC Regulations section 6(1) proceedings were held to determine whether allegations of invalidity or non-infringement made in a generic's Notice of Allegation ("NOA") were justified, the New NOC Regulations provide for section 6(1) proceedings to proceed by way of actions, with viva voce witnesses and discovery rights. Some of the most noteworthy changes/outcomes of the new scheme include:

• The relief sought is no longer an order prohibiting the Minister of Health from issuing a Notice of Compliance to the second person (the generic) based on whether the allegation(s) of invalidity and/or non-infringement in the generic's NOA are justified. Rather, proceedings under the New NOC Regulations provide for final determinations of validity and infringement;
• Patentees are now granted an automatic right of appeal should the generic succeed at the trial of the action, regardless of whether the generic's NOC has been issued;
• As proceedings will take place via full action rather than via application, parties will be granted rights of discovery and trials will take place with viva voce testimony being provided. Thus, there will no longer be out of court cross-examinations followed by hearings based solely on transcript evidence;
• Proceedings will still operate on a 24-month timeline, commencing upon the service of the Statement of Claim and ending upon the Court rendering a decision. Completing full actions in this timeframe will result in compressed litigation timelines. Trials are anticipated to run for approximately two weeks;
• Any claim of a patent listed on the Patent Register can be enforced in a proceeding under the New NOC Regulations. Previously, individual claims that did not meet the listing requirements could not be asserted (e.g., process claims, kit claims);
• The scope of recovery under section 8 may be expanded in some situations. The New NOC Regulations do not explicitly impose an end date to the period of recovery, unlike the previous legislation. Further, all plaintiffs to a litigation are to be "jointly and severally" liable, as opposed to just the first person;
• Patentees will be required to produce a variety of documents, such as lab notebooks and research reports, as early as upon serving their statement of claim (45 days after receipt of a NOA);
• The burden of proof for invalidity will lie on the generic in accordance with section 43(2) of the Patent Act; and
• Patentees who do not start proceedings within 45 days of receipt of a NOA will be precluded from instituting proceedings on the same patent against the same generic in the future.

Overall, the New NOC Regulations address certain concerns with the previous scheme but will pose logistical challenges, especially in transitioning to full impeachment/infringement actions in the limited 24-month time period. View a more detailed discussion of the New NOC Regulations.

Introduction of Certificates of Supplementary Protection

CETA also brought about CSPs, a means of restoring up to two years of lost patent protection for pharmaceutical products caused by delays in regulatory activities or obtaining marketing approvals.

In order to calculate the term of a CSP one must subtract five years from the approval date of the drug, and then look at the difference between this date and the filing date of the patent at issue. If the approval date less five years is later than the filing date, there may be CSP eligibility for the difference in time between this date and the patent's filing date, up to a maximum of two years. The Minister of Health can shorten this term at her discretion, for instance if the patentee delayed the process of obtaining its market authorization.

However, not all patents will be eligible for a CSP. Only patents that pertain to a medicinal ingredient or a combination of medicinal ingredients qualify. In short, the only patents that will qualify are those that claim: (i) the medicinal ingredient/combination of medicinal ingredients (the active compound(s) themselves); (ii) the active compound(s) when made by a specified process (product-by-process claims); or (iii) a use of the active compound(s) (use claims). The product/product-by-process/use claimed must relate to the drug for which the authorization for sale was issued.

Additionally, only one patent per medicinal ingredient/combination of medicinal ingredients can benefit from a CSP. Thus, in the situation where a single product is covered by, for example, separate compound and use patents, the patentee will have to select which patent it wants to benefit from the CSP. Further, a strict definition of "medicinal ingredient" is used, and CSPs will not be available to medicinal ingredients that are altered (e.g. as a different salt form, enantiomer, solvate, polymorph, ester, chelate, or in vivo or in vitro post-translational modification of the medicinal ingredient).

A more detailed discussion of CSPs and their introduction into Canadian law can be found in our article Certificates of supplementary protection: Canada's new sui generis patent term restoration regime.

DRAFT Amendments to the Patent Rules

Significant amendments to the Patent Rules have been proposed and are expected to come into force in 2018 or 2019. Important aspects of the amendments include the following:

• Applications will be able to be filed "in any language" provided that the applicant subsequently files an English or French translation within two months;
• Late filing of PCT applications into Canada (by the 42-month deadline from the earliest priority date with payment of a late fee) will no longer be as of right. Rather, late filing by the 42-month deadline will only be permitted where an applicant additionally provides a declaration that the failure to timely enter the national phase was unintentional and a statement of reasons for the failure. The decision as to whether to allow late entry is left to the discretion of the Commissioner of Patents;
• Electronic filing of applications will be permitted and considered received on the actual date of receipt, even if the day is a weekend or holiday. This amendment may prove beneficial to applicants needing to file by a certain deadline to, for example, stay within a one-year grace period for prior disclosures;
• Requests for withdrawal of notices of allowance to allow for further substantive prosecution will be allowed, thus avoiding the approach of allowing an application to go abandoned and then reinstating;
• Priority restoration requests will be permitted within two months of a filing date;
• Reinstatement of abandoned applications may in certain circumstances require a demonstration of due care having been exercised;
• Requests for examination will need to be made within three years of filing instead of the current five years from filing; and
• Responses to office actions and notices of allowance will be shortened to four months, though in some cases may be extendible up to six months with payment of a fee and proper justification.

A more detailed discussion of the draft amendments to the Patent Rules can be found in our article Draft Patent Rules released for public consultation: overview of key changes.