Tuesday, December 22, 2009

How to get a 27 year extension of time - attack an offical mark

Here's an article Matt Dugas, an articling student in our office, recently published on Lexology about a recent official marks case, where the court granted a 27 year extension of time to file for judical review. Official marks are an odd corner of Canada's Trade-mark Act - thus explaining the almost three-decade extension of time - but they are potentially very powerful, and the lack of detail in the supporting legislation makes them either a frustrating or fun topic to deal with (depending on your point of view - often depending on whether you are a plaintiff or defendant ;) ).

Official Marks: Judicial Review of 1982 Decision by Registrar of Trade-marks

In a recent Federal Court decision, Princess Group Inc. was permitted judicial review of a 27 year old decision of the Registrar of Trade-marks. Given that Judicial Review must be applied for within 30 days of a decision, how is it that Princess was able to obtain an extension of almost three decades? The answer lies in the complexities of “official marks”, which occupy an obscure corner of the Trade-Marks Act.

Official marks are marks adopted by “public authorities” and protected in Canada by their own unique but ill-defined legislative scheme. Official marks are both a powerful tool for public authorities (more powerful than a normal trade-mark) and a subject of controversy. Relevant issues include who qualifies as a public authority, the status of older marks of questionable validity, difficulties in opposing the official marks, whether judicial review is an appropriate venue for disputes, and how these issues interact with trade-marks and patents.

An example of the difficulties arising from official marks is the decision in Princess Group Inc. (“Princess”) v. Canadian Standards Association (the “CSA”). After being sued for infringement of CSA’s official mark, Princess applied for judicial review of the Registrar’s 1982 decision to give public notice of the official mark. It is suspected that Princess wishes to challenge the decision of the Registrar on the ground that the CSA is not a “public authority” and cannot own an official mark at all. Judicial review was granted for a decision that dates back a staggering 27 years.

Official Marks

A public authority is given protection of its official mark simply by asking the Registrar to give public notice of the mark’s adoption and use. Usually, public notice consists of publication by the Registrar in the Trade-marks Journal. Doing so prohibits any other person from adopting the mark or a similar mark in connection with a business, as stated in s. 9(1)(n)(iii) of the Trade-marks Act :

9. (1) No person shall adopt in connection with a business, as a trade-mark or otherwise, any mark consisting of, or so nearly resembling as to be likely to be mistaken for,
(n) any badge, crest, emblem or mark

(i) adopted or used by any of Her Majesty’s Forces as defined in the National Defence Act,

(ii) of any university, or

(iii) adopted and used by any public authority, in Canada as an official mark for wares or services,

in respect of which the Registrar has, at the request of Her Majesty or of the university or public authority, as the case may be, given public notice of its adoption and use; (emphasis added)

Although based in the Trade-marks Act, an official mark is not a trade-mark. Compared to a trade-mark, an official mark is both more powerful and, if one is a public authority, easier to obtain.

An official mark is very powerful, primarily because of the broad protection granted in s.9(1)(n)(iii): “No person shall adopt in connection with a business, as a trade-mark or otherwise, any mark consisting of, or so nearly resembling as to be likely to be mistaken for” the official mark. Official marks are not limited to specific wares or fields of use. Official marks can also be used to restrain uses of marks that are not a “trade-mark use” – i.e. if a company is using a mark but not as an identification of source, an official mark may well be used to stop such uses whereas an identical trade-mark registration would fail. The only real limitation to an official mark is that a prior user of the same or similar mark may continue their use after the adoption of the mark by the public authority.

Official marks are easily obtained by a public authority. Section 9(1)(n)(iii) sets out simple and minimal requirements, namely that (1) the authority is a pub-lic authority, and (2) the authority has adopted and used a mark. The Registrar has virtually no discretion to refuse to give notice to the public of the adoption of an official mark (by advertisement in the Trade-marks Journal and in CIPO’s on-line data-base) if the requirements are satisfied . A request for an official mark is often kept confidential until the Registrar gives public notice that the mark has been adopted. It is up to the Registrar alone to determine whether the requirements are met, and there is no process whereby a third party would be informed of the process, no opposition mechanism, and no formal method for an opponent to make submissions to the Registrar. The Registrar may not refuse to give notice of its adoption and use on the ground that it is merely descriptive or is not distinctive of the authority’s wares or services. It is not necessary to describe the wares or services that the official mark will be associated with, and a previously registered trade mark by a third party is not a bar to the adoption of a similar official mark by a public authority. Finally, official marks cannot be challenged for subsequent non-use.

Public Authority Status

This scheme, which grants significant powers to the holders of official marks, places a heavy burden upon the Registrar to police who is a “public authority” under the statute. Whether a given body qualifies as a public authority has become increasingly contentious as public and quasi-public bodies are competing in the private sphere more frequently and wish to more aggressively protect their identifying marks.

Historically, there have been allegations that the Registrar has been too liberal with this requirement. It is thought that there are currently many dubious official marks that have been advertised belonging to parties that should not have been considered public authorities.

In the past, a requesting party simply had to provide the Registrar with a statement that it was a public authority, and the Registrar would proceed to give public notice of the adoption of the official mark. This practice was perhaps uncontroversial when few organizations (with clear and official government ties) pursued official marks, but over time this process resulted in considerable controversy and debate as more groups unilaterally claimed “public authority” status. Are trade associations, aboriginal groups, business associations, foreign public authorities, religious organizations, community groups, school boards, political parties, charities, special interest groups, or standards/quality assurance associations (such as the Canadian Standards Association) public authorities? Can the Olympic rings or aboriginal symbols be official mark of a public authority?

In response to critical Federal Court decisions, the Registrar of Trade-marks released a Practice Notice in 2002, the effect of which is that the Registrar now requires evidence of public authority status on every request to publish an official mark.

The Registrar follows a two-pronged test for deter-mining whether a body is a public authority. The first prong of the test is government control. The body must provide evidence of control that demonstrates ongoing government supervision of its activities, specifically that the government has continuous influence in the body’s governance and decision making process. It is not necessarily sufficient that a body is statutorily self-regulating.

The second prong of the test is public benefit. The activity of the body must benefit the public in Canada. Relevant considerations include the objects, duties and powers, and distribution of assets of the body.

While these tests will limit official mark’s public au-thority requirement from being construed too liberally in the future, what about older official marks that date back to the Registrar’s former broad acceptance of claimed public authority status?

Official Marks and the Princess v. CSA decision

In 1982, upon request by the CSA, the Registrar gave public notice of the adoption and use of an official mark. The official mark consisted of a large “C” enclosing a smaller “s” and “a”. The CSA is a “not-for-profit membership based association” that develops standards for business, industry, government and consumers.

In 2008, the CSA alleged that Princess offered wares that infringed CSA’s official mark, in violation of s.9(n)(iii) the Trade-marks Act.

Princess argued, as a defence, that the official mark should not have been accepted or advertised by the Registrar of Trade-marks in 1982 and sought judicial review. Presumably, Princess will argue that the Registrar’s actions were improper on the basis that the CSA should not have been considered a public authority for the purposes of s.9(1)(n)(iii), although the argument is not explicitly made in court proceedings to date.

Official Marks and Judicial Review

It is unclear, from reading the Trade-marks Act, whether and how a party can contest the adoption of an official mark. Section 57(1) of the Trade-marks Act allows any interested party can apply to the Federal Court to strike or amend any entry in the Register of Trade-marks; however, official marks are not listed in the Register. Section 56(1) of the Trade-marks Act creates a broad right to appeal to the Federal Court from any decision of the Registrar; however, it is suspected that only parties to the decision have standing for a right to appeal the decision. For an official mark, the only party to the Registrar’s decision is the public authority.

In 2002 this uncertainty was resolved by the Federal Court of Appeal in Assn. of Architects (Ontario) v. Assn. of Architectural Technologists (Ontario) (2002 FCA 218). The Court of Appeal ruled that in the vast majority of cases Judicial Review is the only possible way to challenge the validity of an official mark (although the decision allowed for the possibility that a third party could, in extremely rare cases, somehow be included as a party to the Registrar’s decision in accepting an official mark and therefore have standing to appeal under s.56(1)).

The 27 Year Deadline

Challenging an official mark through judicial review is a counterintuitive solution, and one that poses a number of concerns.

One limitation is the issue of standing. A party that is later sued has standing, as does a party that possessed a previous interest in the mark before the official mark was adopted by the public authority. It is doubtful that other parties, such as parties with general public interest concerns, would have standing for judicial review, although a person who has ap-plied for the same or a similar mark may have standing.

Tied to the standing issue is the issue of time limitations. Section 18 of the Federal Courts Act requires that an application for judicial review be commenced by a party that is “directly affected” within 30 days of the decision.

CSA argued in the Princess case that Princess was required to file their judicial review application within 30 days of the 1982 advertisement of their official mark – so Princess was seeking an absurd 27 year extension on the deadline. However, Prothonotary Milczynski and the Federal Court ruled that Princess only became “directly affected” by the decision when they received the CSA’s full statement of claim in April of 2009, and their 30 days in which to file for judicial review began to run on that date. It is uncertain how this would be applied if a party sought judicial review of an old official mark without being sued by the official mark owner.

As other holders of old official marks seek to enforce their marks, we may see a series of judicial review proceedings that become, as in the Princess v. CSA decision, comically out of whack with other judicial review proceedings.

The effect of the Princess decision is that Princess was not time barred from challenging the validity of the official mark through judicial review. If Princess successfully establishes that the Registrar should not have given public notice of the adoption and use of the official mark by the CSA, on the basis that the CSA should not have been considered a public authority or otherwise, then CSA’s mark will lose its protection as an official mark.

It remains to be seen whether the 27 year gap be-tween the Registrar’s decision and the judicial review proceedings has a significant practical impact compared to normally-timed judicial review proceedings. Among other challenges, Princess presumably will have to establish whether there was government control of the CSA in 1982, a question of evidence that may have disappeared over time. Hypothetically, a holder of an official mark could currently be a true public authority, but the mark could be revoked if it is determined on judicial review that it should not have been considered a public authority when the mark was originally advertised.

Accordingly, holders of some official marks may be reluctant to enforce their rights. In light of the uncertainty surrounding official marks, they may be concerned that challenging another party’s use of the mark may result in their mark being revoked. Instead of risking the loss of the mark, the holder may endure infringement by bolder parties while benefit-ing from the deterrent value the mark has on more cautious parties.

Application to Invalidation of Other Intellectual Property Rights

The use of Judicial Review as a backdoor defence against infringement, and a defendant to an infringement proceeding only becoming “directly affected” when infringement is claimed, may seem like a tempting option for defendants to investigate in response to patent or trade-mark infringement cases. Such a strategy, however, is not as promising as it seems.

The availability of Judicial Review is generally precluded when other forms of appeal or recourse are available. Official mark cases have been differentiated from patent cases in this regard . An “interested person” can bring an impeachment action against a patent after it is granted, and a party can seek to have an improperly granted trade-mark expunged from the Registrar.

The judicial review approach exists uniquely for official marks because there is no other apparent way to challenge the decision of the Registrar to advertise an official mark.


Although they are a part of the Trade-marks Act, official marks differ substantially from trade-marks in many respects. The protection created by the legislation is very broad and ill-defined, creating uncertainty both in the marketplace and in the courts.

While it has been settled in the courts that judicial review is the appropriate mechanism for contesting an official mark, the 27 year differential between the Registrar’s advertisement and the review in Princess is an example of the peculiar issues and considerations that can arise in these proceedings.

As public authorities are asserting their rights in the marketplace more aggressively, issues like this continue to highlight the shortcomings of the official marks regime. Accordingly, legislators may begin to question the policy basis for bestowing on public authorities the additional benefits an official mark – even if it may be warranted for government departments or offices, why do quasi-public organizations like the Canadian Standards Association require such a dramatic branding advantage in the market-place? Trade-marks could adequately protect the identifying marks of many public authorities without the complications and difficulties inherent in the official marks regime. Eliminating or limiting some aspects of the official marks system is a possible solution to the difficulties outlined above.

Wednesday, October 14, 2009

Victor is Dressed to Bill!

Coming up on Oct. 21: Precedent Magazine's annual "Dressed to Bill" fashion event (tagline: lawyers on the catwalk!)

This year featuring Gilbert's own Victor So!

Photos sure to follow, whether embarrassing or not ;)

Thursday, October 1, 2009

Sana Halwani impressive as usual.

Congratulations Sana!!!

A big, belated congratulations to Sana Halwani, who managed the impressive feat of passing the Canadian Patent Agent exams on her first try!

By way of background, only 3-4% of first time writers of the patent agent exams pass, so Sana is in elite company (albeit this is typically where she can be found – look at her profile here).

Canadian courts confirm differential profits approach to Accounting of Profits cases

Just catching up on things. I wrote this for Lexology a little while ago. Thanks to Art Renaud for bringing these cases to my attention.

Two recent Federal Court of Canada cases held that when calculating an accounting of profits in patent cases the “differential profits” approach - comparing the profits actually made with those that would have been made using the best non-infringing option – must be applied. These decisions, combined with the Supreme Court of Canada’s decision in Monsanto v. Schmeiser, are important precedent for the application of the accounting of profits remedy in patent cases in Canada and the Commonwealth.

The two cases, both decided by Zinn J., are Monsanto v. Rivett, 2009 FC 317 and Monsanto v. Janssens, 2009 FC 318.

“Actual profits” vs. “differential profits”: what’s at stake?

The accounting of profits is the dominant monetary remedy for patent infringement in Canada. Unlike damages, which measures the amount of the remedy by the loss of the successful plaintiff, the accounting of profits award forces the defendant to disgorge the profits attributable to the infringement. In Commonwealth countries, successful patent plaintiffs often can choose the accounting of profits instead of a damages award, and in fact generally do so, for strategic reasons (it is easier to protect sensitive information in an accounting of profits inquiry than a damages inquiry) and/or because of an expectation that the accounting of profits award will be larger than a damages award.

There are two competing theories on how to calculate the size of an accounting of profits award:

• subtract costs from the gross revenue attributable to the infringement – the “actual profits” approach

• subtract the profits that would have been made using the best non-infringing option from the actual profits made – the “differential profits” approach

These have been much debated in the case-law since the accounting of profits remedy was revived in the early 1980s. Since the actual profits approach will usually generate a larger award on the facts in the cases where an accounting of profit has been sought, the plaintiffs typically support this approach, with the defendants proposing the differential profits approach.

Until 2004, the results in the cases were fairly one-sided, with several decisions explicitly rejecting the differential profits doctrine in favour of the actual profits doctrine, and no case clearly adopting the differential profits approach.

As a practical matter, these approaches can lead to very different sizes of award. For example, in the Schmeiser case, the application of the differential profits approach reduced the plaintiff’s monetary award to zero. In the Rivett and Janssens cases, the application of the differential profits approach decreased the plaintiff’s monetary awards by 69%.

Debate: the innocent infringer and the
Supreme Court of Canada decision in Schmeiser

The debate between the actual and differential profits approaches took a dramatic turn in 2004 in the Supreme Court of Canada case of Monsanto v. Schmeiser. In that case, the defendant Percy Schmeiser was found to have deliberately raised and sold a crop of genetically modified canola and liable for infringing a Monsanto patent. The trial judge awarded an accounting of profits, and using the actual profits approach awarded Monsanto $20,000. The Supreme Court instead applied the differential profits approach, finding that the defendant’s profits “were precisely what they would have been had they planted and harvested ordinary canola. … The appellants' profits arose solely from qualities of their crop that cannot be attributed to the invention." Hence, there was no difference between the defendant’s profits with and without the infringement, and the Supreme Court held that no profits at all were to be awarded.

Nevertheless, the Supreme Court’s treatment of the issue led to further debate. If the Supreme Court was mandating a causation based approach to the accounting of profits remedy resulting in the differential profits approach, this was the portion of the Schmeiser decision with the greatest practical impact. However, the section dealing with the accounting of profits remedy was a scant five paragraphs long, and did not discuss any of the twenty years of case law it was supposedly overruling. While many practitioners embraced the Schmeiser decision as making the differential profits approach as a new “rule of law”, others saw Schmeiser as a signal that the differential profits approach should be used when appropriate, but that courts were free to apply the actual profits or differential profits approach as appropriate based upon the facts and equities of the case before them.

Clouding the issue is the possibility that the Supreme Court was determined to issue a ruling applying the differential profits approach to accounting of profits for a reason not directly before the Court - the “innocent infringer” problem. With the patenting of genetically engineered crops arises the possibility of the “innocent infringer” – exemplified by a person who unknowingly cultivates genetically modified crops with a patented gene after seed blows onto their land. Since patent infringement does not require knowledge either of the patent or that the impugned acts might infringe a patent, the “innocent infringer” is still infringing a patent. Although the amount of damages in such a situation is likely to be small, under the actual profits approach to the accounting of profits the innocent infringer could be liable to disgorge the entire profits from the sale of the tainted crop.

Such a result seems unfair on its face, and led to calls in Canada by expert commissions for changes to patent law, including special innocent infringer exceptions and rules. In reply, legal experts (primarily Professor Norman Siebrasse of the University of New Brunswick) answered that such changes were unnecessary and counterproductive, since a proper application of well-established principles of causation in remedial awards from general tort law in the patent context would lead to the differential profits approach. Under a differential profits approach, the “innocent infringer” would not have gained any particular profits beyond the best non-infringing option (the use of unpatented seed), and any monetary award against an innocent infringer would be modest at best.

On the actual facts of the Schmeiser case, the defendant was not an innocent infringer. Nevertheless, the Schmeiser case did involve genetically modified plants, and the writings of Professor Siebrasse were specifically cited by the Supreme Court. It is certainly arguable that the Supreme Court only applied the differential profits test in response to concern over the innocent infringer problem, and did not intend that the differential profits approach should always be applied when calculating an accounting of profits.

The recent decisions of Zinn J. in Rivett and Janssens

This was the state of affairs until the cases of Monsanto v. Janssens and Monsanto v. Rivett, were released in March 2009. These cases, heard together before Zinn J. of the Federal Court, both were factually similar to the Schmeiser case: all of the defendants were found to have deliberately planted, harvested and sold genetically modified soybeans, thus infringing a Monsanto patent. The plaintiffs elected an accounting of profits remedy, and urged Zinn J. to apply an actual profits approach. The defendants took the position that, following Schmeiser, Zinn J. was bound to apply the differential profits approach.

Given the factual similarity between the Schmeiser, Janssens and Rivett cases, it is unsurprising that Zinn J. followed the Supreme Court’s lead and applied the differential profits approach.

What is more interesting, and a strong signal to the patent bar in general, is that Zinn J. was clearly of the view that the ruling in Schmeiser set a new legal rule, and the differential profits approach should be applied in all future accounting of profits cases.

Noting that the Supreme Court “relied heavily on and arguably adopts Professor Siebrasse’ analysis of an accounting of profits”, Zinn J. argued that the Supreme Court had established that a causal link must be found between the profits awarded and the invention that is protected. This causation requirement necessarily results in the application of the differential profits approach.

Zinn J. hastened to add that the differential profits approach could still be reconciled with much of the existing case law. In many cases, there was no “best non-infringing option”, resulting in the actual profit and differential profit approaches becoming identical. In other cases, the courts first calculated an amount using the actual profits method, but then performed an apportionment in an attempt to limit the award to the profits actually earned from the use of the invention – essentially, an attempt to reach a causation-based result without the benefit of a causation-tailored approach.

Zinn J. summarized the steps required under the differential profits approach as follows:

a) Is there a casual connection between the profits made and the infringement?’ if there is none, then there are no profits that require an accounting.

b) If there is a causal connection, then what were the profits made by the infringer as a result of the infringement? This amount I shall describe as the Gross profits of Infringement.

c) Is there a non-infringing option that the infringer could have used?

d) If there is no non-infringing option, then the Gross Profits of Infringement are to be paid over to the patentee.

e) If there is a non-infringing option, then what profit would the infringer have made, had he used that option? This amount I shall describe as the Gross Profit of Non-Infringement.

f) Where there was a non-infringing option available, the amount to be paid over to the patentee is the difference between the Gross Profits of Infringement and the Gross Profits of Non-Infringement. This sum is the profit that is directly attributable to and that results from the infringement of the invention.

Zinn J. then proceeded to apply this analysis in the cases at hand. In both cases, the application of the differential profits approach instead of the actual profits approach lowered the award by 69%. The defendants were ordered to disgorge $40,137 in the Rivett case and $11,363 in the Janssens case.

Existence of a non-infringing comparator

Zinn J. had little difficulty in finding that the appropriate non-infringing comparator was “soybean seed that has none of the plaintiff’s invention” – i.e. conventional soybean seed. He rejected the suggestion of the defendants that the comparator should be the price of buying seed from Monsanto and thus obtaining a license.

A difficulty arose as the evidence before the Court was that conventional soybean – i.e. soybean seed not containing the patented genes – was not available on the market, or at least not available at the local co-op. Arguing that the fundamental purpose of the accounting of profits remedy was to “discover the value that the invention has brought to the product”, Zinn J. held that the market availability of the best non-infringing option is not determinative. “If one uses a comparator only if it is actually physically available for use, but not when it exists but is physically unavailable, the fact that the resulting crop has a value apart from the invention will be ignored.”

The accounting of profits remedy going forward

It will be interesting to see if the clear adoption of the differential profits approach as a rule of law by Zinn J. will be followed in other courts, particularly in the United Kingdom and Australia.

In some quarters, the accounting of profits remedy has acquired a reputation as being more difficult to administer than a damages award. Since the accounting of profits award is an equitable remedy and its award is always in the discretion of the court, some courts have taken the position that the plaintiffs need to justify the choice of an accounting remedy instead of being given a free choice. While it may be appropriate for plaintiffs to provide the court with reasons why they should receive an accounting of profits award, the differential profits approach underlies the parallel nature (and difficulty) of the damages and accounting of profits awards. Damages seeks to return the plaintiff to the position they would occupy if there was no infringement; accounting of profits seeks to return the defendant to the position they would occupy if there was no infringement. There is no reason in principle why one remedy should be more difficult to apply than the other.

The adoption of the differential profits approach will often result in lower accounting of profits awards. However, plaintiffs often make their choice of remedies for reasons other than the size of the monetary award, and in some cases the differential profits approach will give a larger accounting of profits award than the actual profits approach. While we may see more damages cases coming out of patent cases in the Canadian courts, it is unlikely that the accounting of profits award will become unused. Successful plaintiffs will need to seriously consider their choice between the damages and accounting of profits remedies in light of these decisions.

Thursday, July 16, 2009

Very Good...

Research In Motion and Visto Corporation Sign Definitive Agreement to Settle Outstanding Litigation

Press release here:

Waterloo, ON and Redwood City, CA — Research In Motion Limited ("RIM") (Nasdaq: RIMM; TSX: RIM) and Visto Corporation ("Visto") announced today that they have entered into a definitive agreement to settle all outstanding worldwide patent litigation between the companies.

The key terms of the settlement involve RIM receiving a perpetual and fully-paid license on all Visto patents, a transfer of certain Visto intellectual property, a one-time payment by RIM of US $ 267.5 million and the parties executing full and final releases in respect of all outstanding worldwide litigation.

The settlement is expected to be completed during the week of July 20, 2009 and is subject to certain closing conditions.

Based on preliminary analysis, RIM expects the majority of the payment to be expensed as an unusual item in the second quarter of fiscal 2010, with the remainder being classified as an intangible asset. Based on this analysis, RIM expects to report Q2 results that reflect U.S. GAAP earnings and earnings per share, as well as adjusted earnings and earnings per share, which would exclude the amount expensed as an unusual item.

Further terms and conditions of the agreement are confidential.

Research In Motion Limited is a publicly held company that trades on NASDAQ and the Toronto Stock Exchange (NASDAQ: RIMM; TSX: RIM). Visto Corporation is a privately held firm and the parent company of Good Technology.

This news release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and Canadian securities laws relating to the anticipated timing of completion of the settlement as well as RIM's preliminary analysis of the financial impact of the payment to Visto. The terms "expected" and "expects" are intended to identify these forward-looking statements. Forward-looking statements are based on estimates and assumptions made by RIM in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors that RIM believes are appropriate in the circumstances. Many factors could cause actual results, performance or achievements to differ materially from those expressed or implied by the forward-looking statements, including, without limitation: the parties’ satisfaction of the various terms and conditions of the settlement; delays resulting from factors within or outside the parties' control; risks inherent in matters relating to patent litigation and the settlement thereof; and possible changes to RIM's preliminary analysis of the financial impact of the payment to Visto based on RIM's continuing review of such matters in connection with the completion of the settlement, and the preparation and filing of RIM's interim consolidated financial statements for the second quarter of fiscal 2010. Certain of these risk factors and others relating to RIM are discussed in greater detail in the "Risk Factors" section of RIM's Annual Information Form, which is included in its Annual Report on Form 40-F and RIM's MD&A (copies of which filings may be obtained at www.sedar.com or www.sec.gov). These factors should be considered carefully, and readers should not place undue reliance on RIM's forward-looking statements. RIM has no intention and undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Gilbert's represented Visto in the Canadian litigation.
Damages Calculations in Intellectual Property Cases in Canada (2007)
Norman Siebrasse, Alexander Stack, and the Cole & Partners IP Litigation Support Group
(2008) Vol 24 No. 2 Canadian Intellectual Property Review, pp 153-188

This is an update of an article we (members of Cole & Partners and I) first published in 2001. As with our recent article on accounting of profits, a big change is the addition of Norman Siebrasse as a co-author. Norman certainly bring a new level of vigor and rigorous thinking to these issues, which I think is reflected in the final article.

This is an update - and the fundamental law of damages has not changed since 2001. However, there is a greater emphasis in recent case-law - and in the article - on the remedial basis for the remedy, and on grounding patent law (including remedies) in fundamental common law tort principles. This leads to some interesting questions - for example, is the commonly stated rule from United Horse Shoe (1888, House of Lords) that damages are calculated assuming the infringer had never entered the market, or that it is not relevant that the plaintiff would have been equally hurt had the defendant produced a non-infringing product, good law? My suspicion is that it is not.

As with the Accounting of Profits article, the CIPR version of the article is heavily cut from the version available on the Cole & Partners website .

Friday, May 29, 2009

a bit more...

The three copyright reports by the Conference Board of Canada that were yanked all had the same three authors: Curtis Cook, Stephan Rimac, and Guy Stanley

Michael Geist has a side by side comparison of parts of the Conference Board and International Intellectual Property Alliance reports here: http://www.michaelgeist.ca/content/view/4000/125/

MG also has a post showing that four entertainment-industry lobbying groups self-reported 22 separate meetings with government officials in the first four months of 2009. http://www.michaelgeist.ca/content/view/4013/125/

Too Amusing not to Memorailize...

At the risk of becoming an intellectual property lawyer infringing the copyright of a newspaper reporting on a research organization preparing a report on copyright plagiarizing a U.S. entertainment lobby group... (well off the irony-o-meter), the first paragraph from today's Globe and Mail gets the point across:

One of Canada's most respected research organizations has a black eye after being forced to withdraw three reports on copyright an intellectual property because they contain plagiarized information from a U.S. lobby group for the entertainment industry.

See http://www.theglobeandmail.com/news/technology/think-tanks-approach-to-hollywood-copy-that/article1158376/
Headline: Think tank's approach to Hollywood: Copy That ;)

The research organization in question is the Conference Board of Canada. Many apologies about how internal rules (including external review) were not followed. The newspaper article doesn't say who individually, specifically wrote these now-withdrawn reports.

Who blew the whistle? The indefatigable Michael Geist. More (much more) at http://www.michaelgeist.ca/

At the least, this is really good anecdotal evidence of the international transmission of ideas and how this can influence international cooperation, harmonization etc. (Feel free to substitute lobbying for ideas in the preceding sentence) One debate in the academic/theoretical arena, of course, is whether such activity actually causes a sovereign country (like Canada) to act in anything other than its "self-interest". This invites a long discussion on the meaning of "self-interest" and how a country figures out what is in its "self-interest", but my personal short answer is yes.

I may come back and edit this post to add more information if I get more time.

Monday, April 27, 2009

Resolving the debate over drug patent settlements: three easy steps

I've been a bit slow in getting this up - its by Tim Gilbert on his proposal for Congressional reform in the areas of drug patent settlements and authorized generics.


Tim Gilbert

April 20, 2009

Congress should address drug patent settlements by i) setting clear rules on presumptively lawful agreements; ii) enabling the FTC to act as a gatekeeper to prevent anticompetitive agreements falling outside the safe harbor; and, iii) restoring the original incentive in Hatch-Waxman to challenge patents by eliminating authorized generics during the 180 day generic exclusivity period.

Two opposing views of drug patent litigation settlements threaten to derail the pharmaceutical industry and harm consumers in the long run. The first view, held by the Federal Trade Commission (FTC), is that all drug patent litigation settlements involving the exchange of consideration flowing from a brand to a generic company are inherently anticompetitive. On this view the FTC urges Congress to ban all so-called reverse payments on the grounds that they are anticompetitive. But the remedy prescribed may be too strong by half - it may indeed discourage parties from being creative in resolving disputes that should be settled and result in longer delays before drugs become available in generic form. Further, it does not take into account the fact that many of these deals involve generic companies simply getting back what Congress promised them in 1984 in the Hatch Waxman Act but has lately been eroded – 180 days of exclusivity to the first generic company to challenge a drug patent.

The opposing view, that drug companies should be able to structure any deals they want, also threatens to harm consumers. What proponents of this view ignore is that unlike in other areas of commerce, parties to litigation by settling a drug patent case can tie up markets for years. The generally sound policy objective of allowing private parties to order their affairs and settle litigation should come under closer scrutiny when, as a result of the settlement, no other party can enter the market. The big winners in the settlement of drug patent litigation are the parties. When a brand company pays the generic company hundreds of millions of dollars not to make a product – the brand company wins by retaining its monopoly, the generic company wins by receiving an upfront payment not to make a product, but the public is potentially deprived of a less expensive generic drug. The obvious question is whether the consideration was exchanged for a later generic entry date.

Can these two views be reconciled? This paper argues that they can and that the solution in a nutshell can be boiled down to three steps. First, Congress needs to set clear rules on what types of drug patent settlements are presumptively lawful – a safe harbor. These would include settlements that allow early generic entry pre-patent expiry without additional consideration. Another example is settlements involving payments from brand companies to generic companies that compensate generic companies for their development and litigation costs (with no other consideration). This would allow private parties to organize their affairs and settle cases without the specter of a possible antitrust lawsuit and the remedy of treble damages.

Second, Congress needs to create an expeditious mechanism where the FTC can litigate disputes about whether deals falling outside the safe harbor are anticompetitive and set a clear standard for the agency to apply in determining whether drug patent settlements are anticompetitive. This would allow parties to continue to be creative in structuring settlements in any way they wanted – with the knowledge that the FTC may choose to challenge a deal within a particular window and before a forum that is familiar with the unique competition concerns arising in the pharmaceutical industry. Congress also needs to set a clear and practical-to-apply standard on what constitutes an anticompetitive settlement in this industry so that there is not such a disparity of views on such an important area of public policy. The suggested standard is for the FTC to determine what consideration is exchanged in a drug patent settlement (sometimes settlements are complicated and involve consideration other than money), the value of such consideration (the parties may have ascribed values that are not in keeping with the fair market value of the consideration) and whether the consideration has been given in exchange for an agreed entry date (Congress would be signaling that deals that do no more than pay a potential competitor to not enter the market are not lawful).

Third, Congress needs to restore the original incentive in Hatch-Waxman to challenge patents in the first place – by precluding brand companies from launching an authorized generic during the 180 day period of generic exclusivity. This levels the playing field in drug patent settlement negotiations. At present there is little incentive for a generic company not to settle a drug patent dispute – even if the generic company has a strong case it can assume that if it wins the brand company will launch an authorized generic and take a big part of the generic company’s sales. The generic company will prefer to get a payment today and agree to enter the market at a later date, with a commitment from the brand company not to launch an authorized generic.

In this paper I will first provide background information on the legal and regulatory structure of the pharmaceutical industry. Second, I will identify the problem as identified by the FTC and some counter-arguments to the FTC’s position. Third, I will identify a possible resolution to the impasse that seems to divide parties to the debate.


The first thing that needs to be clarified about the pharmaceutical industry (as compared to other industries from a competition perspective) is that there is not an unbridled free market in the approval and sale of drug products. This is the case in many ways and for lots of good reasons. Take one example – the approval of drugs. The Food and Drug Administration (FDA) plays an important role in ensuring the safety and effectiveness of drugs. For this reason, it is unlawful to sell a drug without the FDA approval. Another example lies in the interplay between patents and the drug approval process. Unlike any other area of industry, no one can even get approval to sell a drug product that is equivalent to an already approved product unless and until (i) all patents that are listed in the directory of patents maintained by the FDA known as the Orange Book have been addressed by the potential entrant, (ii) the entrant has notified the existing player in the market of the potential entrant’s intention to enter the market, and (iii) the existing entrant has been given the opportunity to sue that entrant and permanently enjoin it from entering the market. During the time it takes to resolve the law suit, the FDA cannot approve the entry of the potential entrant to the market.

There is a further complexity on top of all of this. Potential entrants to the market who seek FDA approval after the first potential entrant files for approval with the FDA must wait until the first potential entrant has enjoyed 180 days of commercial marketing before they can be approved by the FDA to enter the market.

These regulatory provisions are unique to the pharmaceutical industry and have their origin in the Hatch-Waxman Act. Hatch-Waxman has been characterized in many places as a legislative compromise and a careful balance between providing an incentive to companies to invest in new drug development and the clinical trials necessary to demonstrate a drug is safe and effective for public consumption, and providing an incentive to companies to challenge invalid patents or to demonstrate that a proposed competing version of an already approved product will not infringe a valid patent.

In many ways the Hatch-Waxman has stood the test of time and provided a useful structure to grow the industry. Many new useful medicines have been brought to the market with obvious public benefits while at the same time the generic industry, which was in its infancy at the time Hatch-Waxman was first enacted, is now robust and supplies nearly 70 per cent of the prescriptions dispensed in the U.S. but consuming less than 20 per cent of all dollars spent on prescription medicines.

There has been one substantive modification to Hatch-Waxman since 1984. In 2003, Congress, as part of the Medicare Modernization Act (MMA), clarified that brand companies should receive only one automatic stay of FDA approval of a proposed generic drug when suing over a patent listed in the Orange Book. The practice had developed where companies were strategically timing the issuance of patents so that they could sue the potential generic applicant and obtain a multitude of interlocking stays of approval. This practice was known as evergreening. From a competition perspective it caught the attention of the FTC. Previously, the FTC had left administration of Hatch Waxman to the FDA. But the FTC opened an informal inquiry into the activities of one company listing multiple patents over time and took the unusual step of filing its own citizen petition with the FDA inquiring about the legal basis for allowing multiple stays of approval.

In addition to eliminating the opportunity for multiple stays, MMA also contained provisions that govern how the FDA is to handle Abbreviated New Drug Applications (ANDAs). It included a provision that the 180 day exclusivity of a first applicant to file an ANDA can be triggered if the first applicant obtains a favorable court decision on a listed patent in the Orange Book at the Court of Appeals, and a provision listing several ways the first applicant could forfeit its exclusivity - including failure to obtain FDA approval in a timely manner and a judgment of a court that the applicant had violated antitrust laws.

There have been at least two important developments from a competition perspective since MMA. First, brand companies have systematically engaged in the practice of launching their own so-called generic versions of their own branded products during the period of the first applicant’s exclusivity. These are called “authorized generics” in that the brand company has authorized their sale. They are in fact the same product as the brand company, made on the same production lines with the same ingredients but with different labeling. The entry of an authorized generic into the market during the 180 day “exclusivity” period takes market share from the generic company and thereby depletes the reward the generic company was to receive as first applicant.

The FDA has been allowing the launch of these authorized generics during the period of exclusivity in part because the agency is of the view that it does not have the power to prevent them. The operative language of the exclusivity provision prevents the agency from approving a subsequent applicant’s ANDA. The brand company never needs to file an ANDA as it received its approval for the brand product by a New Drug Application. The brand company can just file a labeling change to sell the authorized generic version of its product.

Concerns about the possible anticompetitive effects of authorized generics have been raised by the FTC. The agency has been conducting a study of the issue for many years but it is uncertain when the report will be delivered. Competing industry papers describe the effects differently. Supporters of authorized generics talk about the benefits of competition from additional entrants, suggesting that the wholesale price of drugs go down with the launch of an authorized generic. Opponents state that the price reductions are exaggerated, do not make their way to consumers, and that brand prices trend upwards after the launch of an authorized generic. Hopefully the FTC will provide some further insight into what is happening in the market.

However, there is no question that the presence of an authorized generic is now assumed on the launch of the first generic product, and that this substantially reduces the revenue the non-authorized generic stands to earn in the marketplace.

Reflecting this fact, reports available from the FTC suggest that authorized generics have a dramatic impact in another related development: settlements of drug patent litigation. The FTC has been monitoring the number and type of drug patent settlements since MMA required all companies to file such settlements with the FTC for review. The FTC has mainly been concerned about settlements that involve reverse consideration, payments made by brand companies to generic companies in exchange for discontinuing litigation, taking an upfront payment of cash and agreeing to a fixed (and delayed) day of entry in the future. But the FTC has found that in 2007 approximately 78 per cent of final agreements containing both compensation and a restriction involved the brand agreeing not to launch an authorized generic during the period of the generic company’s exclusivity. This suggests that one of the most important bargaining chips at the negotiating table is the threat of an authorized generic.

The reasons why generic applicants settle litigation are straightforward and make business sense. Why would you roll the dice in a lawsuit where a loss means you will wait until patent expiry to enter the market and a victory will be met with the presence of an authorized generic when you can take a fixed day of entry pre-patent expiry without an authorized generic?

The FTC’s concerns about drug patent litigation in the past have been about brand and generic companies allegedly colluding to split monopoly profits on patents of dubious validity but there appears to be a more benign reason driving many settlements: the attempt by generic companies to secure what was promised in 1984 – 180 days of exclusive generic market presence.

Eliminating authorized generics during the 180 day exclusivity period would take that bargaining chip off the table, but would it more generally satisfy the FTC so there is no need for action by Congress on drug patent settlements?

The State of Play

The FTC’s bottom line argument against patent settlements that involve consideration flowing from a brand company to a generic company (reverse consideration) has been that every time there is anything of value exchanged by the parties, apart from early generic entry pre-patent expiry, consumers are deprived of a generic product. The concern is that the additional consideration could have been exchanged for an agreed upon entry date (i.e. a later date than what consumers could have expected if the consideration was not given).

Courts, however, have not been receptive to the FTC’s argument. The case law suggests the following principal concerns:
  1. The general policy is to favor the settlement of litigation and this extends to patent litigation (see FTC v. Schering-Plough Corporation, 402 F.3d 1056).
  2. Patents involve the right to exclude others from making, using or selling the invention. Absent an extension of a monopoly beyond the patent scope or sham litigation, courts have difficulty finding that agreements violate antitrust laws (see In re Tamoxifen Citrate Antitrust Litigation, 466 F.3d187 and In re Ciprofloxacin Hydrochloride Antitrust Litigation, 544 F.3d 1323).
  3. Courts do not like second guessing the parties’ evaluations of the strength of a patent case. Parties can have wildly different views. In a review of any settlement, courts are reluctant to perform an examination of the merits of the case and the strength of the patent – something which they would have done in a trial (see In re Ciprofloxacin Hydrochloride Antitrust Litigation, 544 F.3d 1323).

The FTC keeps trying to bring antitrust actions despite these losses. Most recently, in January 2009, the FTC brought an action in the federal district court in California against Solvay Pharmaceuticals (the brand manufacturer of Androgel) and three other pharmaceutical companies, only to have it transferred on the basis it had picked the wrong forum. By selecting California, the FTC was hoping to have the case reviewed by the Ninth Circuit, which is said to be a more plaintiff-friendly circuit. The FTC got caught on the horns of a dilemma in that it advised the court that it would try the merits of the patent case if necessary but the patent case itself was before a different circuit.

Legislative Reform

In view of the FTC’s failures in the courts, Members of Congress have come to its aid in the form of bills proposing to change the rules of the game. Senator Kohl (D-WI) with Senators Obama, Leahy, Grassley and others introduced a bill in the last session of Congress (S. 316, 110th Congress) and renewed it with a slightly different version this year (S. 369, 111th Congress). Representative Rush (D-IL), with Representative Waxman and others , introduced similar legislation in the House (H.R. 1706). S. 369 provides what is described as a bright line rule prohibiting drug patent settlements which involve the exchange of anything of value, apart from early generic entry pre-patent expiry. This Bill, unlike the version from the last session of Congress, provides that the FTC may promulgate regulations exempting certain agreements from the prohibition if the FTC finds such agreements to be in furtherance of market competition and for the benefit of consumers. Last year, at the time S. 369 was introduced, it was passed unanimously out of Judiciary Committee but with the caveat that the sponsors would work with other Members of Congress on improving the Bill. Several Republicans expressed concerns that the bright line approach would prohibit settlements which would actually benefit consumers. At the time of hearings before the Judiciary Committee on the subject, Bruce Downey of Barr Laboratories described how his company successfully settled patent lawsuits which resulted in early generic entry. He explained that this was the case in one particular instance because four subsequent generic challengers ended up losing their patent litigation cases and had Barr not settled, there would have been no generic until after patent expiry.

Senator Specter (R-PA) submitted an amendment to S. 316 which would have directed parties that settle drug patent litigation to seek approval from the Court that has carriage of the underlying patent litigation, on notice to the Department of Justice and the FTC. The Court would approve such settlements based on several factors, including the patent holder’s likelihood of success, the length of time remaining before patent expiry, the amount and type of consideration and whether the settlement allows for pre-patent expiry entry by the generic company.

The FTC is not enamored with this approach. The Agency has concerns that the end result of any court review will be the same as the FTC’s previous efforts to reign in patent settlements involving reverse consideration. The factors do not provide a clear direction to the court of what types of patent settlements are unlawful. On close scrutiny, there does not appear to be any change to the legal standard that the court would apply compared to the previous case law. Further, the FTC is concerned about the appropriateness of the forum. A judge with carriage of the patent litigation usually looks forward to resolving cases on his or her docket and would tend to favor settlement.

On the authorized generics front, Senator Rockefeller, together with Senators Schumer, Kohl, Leahy, Brown, Inouye, Shaheen and Stabenow introduced a bill, S. 501, that would prohibit the sale of authorized generic drugs during the 180 day exclusivity period. A similar bill, S. 438, was introduced in the last session of Congress . Companion bills have been introduced in the House by Representative Emerson (R-MO) with Representatives Berry, Moore of Kansas, and Wamp (H.R. 573).

President Barack Obama has addressed the issue of drug patent settlements. As a Senator, he co-sponsored the Kohl Bill in the last session of Congress. He campaigned on the issue and as President he included a provision in his 2010 budget committing his Administration to take action to prevent drug companies from blocking generic drugs from consumers with anticompetitive agreements. But proponents of the two approaches appear to be at an impasse. One approach lumps together all drug patent settlements involving reverse payments and treats them the same – they are presumptively unlawful. The other approach involving a case by case application of factors, looks like it would result in the court making no change at all to the current law other than companies settling patent litigation would receive court blessing for their settlements without antitrust scrutiny.

A Possible Solution

Bright line rules are attractive. They provide clear guidance to industry and the government prescribing acceptable practices. In the patent context, parties should be able to settle litigation without the threat of even further court proceedings. But bright line rules need to be tempered by a recognition that the rules can act as an impediment to the creative resolution of disputes. The rule prohibiting the exchange of anything of value other than early generic entry is useful but perhaps too restrictive. It is possible to contemplate deals that involve different consideration and do not result in an exchange of value for a fixed entry date. This can be addressed by instituting a safe harbor provision.

One such example is the upfront recovery of research and development and litigation costs. The development of an ANDA costs money and patent litigation costs even more money depending on the complexity of the product and the patents at issue in litigation. It is a difficult sell to shareholders of a generic company to recommend a settlement involving the abandonment of the litigation, a date for generic entry many years in the future and no compensation whatsoever for the work that brought the brand company to the negotiating table. By the time the generic company is able to enter the market the brand company may have successfully switched consumers to a new product entirely. It seems reasonable to allow a payment from the brand company to the generic company that reimburses the actual expenditures of the generic company in bringing the litigation to conclusion.

From a procedural efficiency perspective it may be reasonable to set an upper limit on the amount that may be paid to the generic company without documentary proof. This could be set at $10 million. In the context of the kinds of delays that the FTC is concerned about, it is hard to imagine that this amount would be enough to entice a generic company to delay market entry.

Two other safe harbors that would be appropriate relate to commitments given by brand companies to waive statutory exclusivities (such as pediatric exclusivity) or to provide a covenant not to sue a generic company over a patent that is not part of the existing underlying litigation. These provisions would remove potential barriers to entry of generic drug products.

Outside these safe harbors, there can be provisions of a settlement that do not directly involve the date of generic entry but raise anticompetitive concerns.

An example could be a license to sell a particular unrelated product. Evidence may disclose that the license at the negotiated royalty rate is worth $20 million. The fact that the parties have set the value at that number is not dispositive. It may be that any reasonable bargain between arms-length parties would be for a materially different (and lower) amount, and in reality the license is a payment that is consideration for a fixed entry date. For this reason, the FTC could reserve the right to question the ascribed value based on objective expert valuation evidence and challenge the settlement. Note that whether a license is a reasonable bargain between arms length parties is routinely assessed in transfer pricing cases involving the IRS and contracted licenses between related parties.

The heart of the matter is whether both sides of the bargain, leaving aside the entry date, approximately balance. If the objective evidence shows this, then there is no evidence that material consideration has been paid for a fixed entry date. For this reason the test of whether a deal falling outside the safe harbor is anticompetitive can be summarily articulated as follows: whether the consideration received by the generic company was given in exchange for the generic company’s agreement to accept an agreed to entry date.

Who should assess this? Under MMA, parties are already obligated to submit all drug patent settlements for review by the FTC. But the FTC does not have to issue any approval or commence any action complaining about a settlement within any period. If the FTC is going to get significantly enhanced enforcement powers, it seems reasonable for the agency to be required to commence any proceeding complaining about the settlement within a fixed period - for example, 60 days with the possibility of an extension for good cause for no more than an additional 60 days. An FTC review process as proposed above is similar to what the FTC already performs under the Hart-Scott-Rodino Act with respect to corporate mergers.

Who should judge the assessment? The FTC administrative law judges seem best placed to determine these cases as they have expertise in the unique issues involving the triple intersection of antitrust law with patent law and with pharmaceutical regulation. Congress should mandate that the cases proceed expeditiously and afford deference to the FTC judge’s fact finding in any appeal.

The process and standard set out above would not replace the existing law and remedies under applicable antitrust statutes. They are meant only to act as a gate-keeper on drug patent settlements to ensure that the public interest in access to affordable medicines is not compromised by private litigants.

Finally, Congress needs to address the underlying, structural driver of drug patent settlements involving undesirable payments: authorized generics during the 180 day exclusivity period. This should be prohibited. A prohibition on authorized generics during the 180 day exclusivity period will enhance the incentive for generic drug companies to challenge weak patents and pursue worthy patent cases to conclusion. It will protect the intent of Congress in granting the 180 day exclusivity period restoring the original bargain between brand and generic drug companies.

Tim Gilbert is a partner and founder of the law firm Gilbert’s LLP, based in Toronto, and a principal in its D.C. government relations affiliate, Gilbert’s Washington Inc. The views expressed do not necessarily reflect the views of any of Gilbert’s clients. He may be contacted at tim@gilbertslaw.ca.

Monday, April 20, 2009

FCA: basis for a sound prediction must be in application

Also of interest – an FCA decision which supports the necessity of providing the facts to support a sound prediction in the patent application (the opposing position being that it is sufficient to have the facts at the time of the application, but that it is not necessary to put them in the application).

[10] Based on the foregoing, it is clear that the invention was based on a prediction. Although the rat studies were positive, only a prediction could allow for the proposition that raloxifene had the same effect on women, let alone estrogen deficient post-menopausal women who suffered from bone loss. In other words, the claimed utility required for patentability was not demonstrated but predicted based on the information provided in the ‘356 Patent.

[11] The appellant further argues that the Federal Court Judge erred in holding that the ‘356 Patent lacks adequate disclosure. In this respect, the appellant essentially alleges that there is no requirement that the underlying data supporting a sound prediction be disclosed in the patent. It contends that the Federal Court Judge misconstrued recent judicial pronouncements on the issue of sound prediction.

[12] In making this argument, the appellant at the hearing accepted for purposes of the appeal the conclusion reached by the Federal Court Judge at paragraphs 155 and 156 of his reasons that the Hong Kong study was required in order to turn the prediction on which the ‘356 Patent was predicated into a sound one. According to the Federal Court Judge, the Hong Kong abstract of the study conducted by the appellant on 251 post-menopausal women which concluded that “raloxifene show[ed] promise as a skeletal anti-resorptive” would have been a sufficient factual basis upon which a sound prediction of utility for raloxifene could have been made as of the filing date. However, this study was not disclosed in the ‘356 Patent with the result that the underlying factual basis for the prediction and the sound line of reasoning that grounded the inventors’ prediction were not disclosed.

[13] The importance of the disclosure obligation in applying for a patent has been emphasized by the Supreme Court of Canada on a number of occasions in recent years (Pioneer Hi Bred Ltd. v. Canada (Commissioner of Patents), [1989] 1 S.C.R. 1623 at paragraph 23; Cadbury Schweppes Inc. v. FBI Foods Ltd., [1999] 1 S.C.R. 142 at paragraph 46; Free World Trust v. √Člectro Sant√© Inc. 2000 SCC 66, [2000] 2 S.C.R. 1024 at paragraph 13; Apotex Inc. v. Wellcome Foundation Ltd., 2002 SCC 77, [2002] 4 S.C.R. 153 at paragraph 37 (commonly referred to as AZT and hereinafter referred to as such)).

[14] The decision of the Supreme Court in AZT is particularly significant to the disposition of this appeal. According to AZT, the requirements of sound prediction are three-fold: there must be a factual basis for the prediction; the inventor must have at the date of the patent application an articulable and sound line of reasoning from which the derived result can be inferred from the factual basis; and third, there must be proper disclosure (AZT, supra, at paragraph 70). As was said in that case (para. 70): “the sound prediction is to some extent the quid pro quo the applicant offers in exchange for the patent monopoly”. In sound prediction cases there is a heightened obligation to disclose the underlying facts and the line of reasoning for inventions that comprise the prediction.

[15] In my respectful view, the Federal Court Judge proceeded on proper principle when he held, relying on AZT, that when a patent is based on a sound prediction, the disclosure must include the prediction. As the prediction was made sound by the Hong Kong study, this study had to be disclosed.
Eli Lilly Canada v. Apotex (another one! - case names get repetitive in this area) 2009 FCA 97

Costs: straight talk by Justice Hughes

I don’t think this says anything new, but costs in NOC proceedings were dealt with pretty straightforwardly by Justice Hughes in Eli Lilly Canada v. Apotex, 2009 FC 320. Apotex was successful in fending off Lilly’s request for a prohibition order. Note the comment regarding allegations of fraud:

[67] Apotex costs are to be assessed in accordance with the middle of Column IV. Two counsel, a senior and a junior, are allowed for at the hearing and, if in attendance, in conducting cross-examination. One counsel, a senior, is allowed in defending a cross-examination. No costs or disbursements are allowable for any other lawyers, in house or out house counsel, paralegals, students, clerical persons or any other persons other than the expert witnesses that I shall name whose evidence was made of record.

[68] The fees and disbursements actually paid by Apotex or its solicitors to Dr. McClelland and Dr. Williard are allowed provided that they are not disproportionately larger than those charged by the Applicant’s experts. No fees or disbursements allowed in respect of any other witness.

[69] As in some other proceedings of this kind, Apotex raised an allegation in its Notice of Allegation as to section 53 of the Patent Act, an allegation that is close to an allegation of fraud. This allegation remained in play at least until it did not appear in Apotex’s Memorandum of Argument. At the hearing Apotex’s counsel formally acknowledged that it did not rely on this allegation. Apotex’s counsel also assured the Court that the format of its more recent Notices of Allegation was changed to eliminate section 53 allegations. Nonetheless, Apotex’s counsel did not at any early stage in these proceeding notify the Applicant that it would not rely on section 53, a simple enough matter that could have been done by a letter. Therefore I will again direct that the fees and disbursements recoverable by Apotex shall be reduced by twenty-five percent having regard to the section 53 allegation.

Also, another plea for PM (NOC) reform:

[19] I endorse the sentiments expressed by Harrington J. of this Court in Lundbeck Canada Inc. v. Canada (Minister of Health), 2009 FC 146 at paragraph 74 where he wrote that we really do not have evidence by way of actual persons or even “talking heads” in proceedings such as this, we simply have words on pieces of paper. Other than in the most exceptional cases, a Court is not in a position to come to any conclusions as to whether certain witnesses were evasive, or acted as advocates or acted in other ways urged by counsel so as to encourage the Court to take a dim view as to demeanour of any other party’s witnesses. I add my voice to those crying in the wilderness for improvements in the process.

Tuesday, March 31, 2009

Ride to Conquer Cancer

So, in a moment of madness/peer pressure/decision to get in better shape, I signed up for the Ride to Conquer Cancer - a two day, 200 km bike ride from Toronto to Niagara Falls to raise money for cancer research at the Princess Margaret Hospital.

So, dear reader, I am asking you to sponsor me for the ride. It is for a good cause, and almost everyone knows someone whose lives have been touched by cancer. Please go to

I am one of the last people you might expect to do this sort of thing - but I have been training (albeit sporadically and less-than successfully), and I intend to complete the trip, even if it kills me ;) .

(I am part of Team TdF - http://www.conquercancer.ca/site/TR/Events/Toronto2009?pg=team&fr_id=1261&team_id=6780 - while its not a Gilbert's team, there are about 6 or 7 of us on the team )

Thursday, March 12, 2009

Justice Hughes attempts roadmap for counsel seeking to apply Supreme Court's Sanofi decision

Here's a recent article by Nathaniel Lipkus, which I neglected to post when it first came out...

The Federal Court denied Bristol-Myers Squibb’s application to prevent Apotex from entering the Canadian cefepime market, and in doing so attempted to bring much-needed certainty to the law of obviousness and anticipation in Canada.

On February 10, 2009, the Federal Court of Canada released its decision in Bristol-Myers Squibb Canada Co. v. Apotex Inc., 2009 FC 137. In his decision, Justice Hughes attempts to summarize developments in the law of obviousness and anticipation of patents in Canada, following the Supreme Court’s November 2008 decision in Apotex Inc. v. Sanofi-Synthelabo Inc., 2008 SCC 61.

The recent BMS case is a proceeding under the Patented Medicines (Notice of Compliance) Regulations involving Canadian Patent No. 1,213,882, a patent claiming the monohydrate form of cefepime dihydrochloride, which is an antibiotic marketed by BMS in Canada as MAXIPIME. Apotex made several allegations of invalidity. Justice Hughes accepted Apotex’s allegations of obviousness and double-patenting but denied its anticipation argument.

After Apotex filed its Notice of Allegation in respect of cefepime, BMS made a partial disclaimer of its asserted claims. Nonetheless, Justice Hughes ruled on the versions of the patent claims as they existed at the time of Apotex’ NOA.

In applying the law of anticipation, Justice Hughes had regard to the Sanofi decision, and also to his recent ruling in Abbott Laboratories v. Canada (Minister of Health), 2008 FC 1359. Sanofi had required explicit consideration of disclosure and enablement in determining whether a patent claim had been anticipated. In Abbott, Justice Hughes had added to the list of considerations in assessing disclosure and enablement, finding that a disclosure need not have been recognized at the time as such, and that determinations of disclosure and enablement are to be made on a balance of probabilities.

Apotex had conducted extensive testing modeled after the experiments in the 882 Patent, intended to demonstrate that the monohydrate form of cefepime had been formed in the testing in the 882 Patent. However, Apotex had conducted its experiments before serving its NOA and without disclosing the experiments in the NOA. Consequently, Justice Hughes accorded the testing little weight. Finding that Apotex bore the burden in demonstrating anticipation, Justice Hughes did not find the asserted claims to be anticipated.

In summarizing the legal principles relating to obviousness, Justice Hughes had regard to the Sanofi decision, as well as the Federal Court of Appeal’s recent decision in Apotex Inc. v. Pfizer Canada Inc., 2009 FCA 8. Justice Hughes recognized and applied the Windsurfing questions adopted by the Supreme Court in Sanofi, modified by the Federal Court’s observation in Pfizer that “the mere possibility that something might turn up is not enough”.

Justice Hughes slavishly answered the Windsurfing questions and concluded that asserted claims of the 882 Patent were obvious. Apotex relied upon a Greek patent application that was nearly identical to the 882 Patent, except in respect of disclosures of the monohydrate as having improved stability compared to the anhydrate. Acknowledging this as the only difference between the prior art and the 882 Patent, Justice Hughes found obviousness of the 882 Patent, and in doing so, offered the following analogy, which will surely be cited by patent defendants in upcoming cases:

"[160] Is it unexpected that given a class of materials all having excellent stability, that one member of the class, when tested once, would exhibit superiority over another? All members of a professional basketball team are accomplished players, it is not unexpected that on a particular day one player will perform better than one of the other players. That does not mean that such a player is surprisingly or unexpectedly better than all or most of the rest of the team."

Despite alluding to the controversial concept of selection patents in the above passage, Justice Hughes shied away from undertaking a selection patent analysis apart from his obviousness and anticipation analyses, finding that “there is a danger in giving names to certain patents and then, having given such names, arguing whether the patent meets criteria for such names … there is no need to somehow further the discussion through any lens created by labelling the patent a selection patent.”

It is too early to say whether BMS will generate the much-needed certainty in patent law that plaintiffs and defendants alike are looking for after Sanofi. However, in BMS, Justice Hughes does provide litigation counsel a clear roadmap for applying the tests laid out in Sanofi, as he sees them. Time will tell whether appeal courts will vindicate his attempt at simplification.

Emerging from under a rock...

Posting here has fallen off the map - basically because I, and the entire Gilbert's firm, have just gone through a really busy stretch. For me, that included about five weeks of discoveries plus an appeal before the divisional court.

But I'm not going to complain: I'd much rather be busy than have no work to do.