Saturday, February 13, 2010

Privilege extended to American patent attorneys

Here is an article I recently published on Lexology (about a motion I argued).

There is apparently a rule against the word "silly" appearing in a legal publication; however, the present Canadian situation on privilege and Canadian patent prosecution is silly (for the reasons I cleverly describe as "odd" and "startling" ;) ). Just to be clear: the court reached the correct decision in DataTreasury, but the overall situation for Canadian patent agents and patent agent/lawyers is, err, less than ideal.

The Canadian Federal Court recently held that in appropriate circumstances, communications between an inventor and an American patent attorney regarding drafting a patent application and prosecution are privileged. It provides important lessons for American and other foreign patentees who wish to assert privilege in Canada.

In DataTreasury v. Royal Bank of Canada et al. (decision dated November 6, 2009, as yet unreported), a Canadian patent case, the defendants sought to compel the patentee DataTreasury to produce documents from the files of the U.S. lawyers who drafted, filed and prosecuted the corresponding U.S. application. These documents included drawings prepared by the inventor to explain his invention to his lawyers, drafts of the patent application, and correspondence. The defendants argued that such documents were relevant to identifying the true inventors of the DTC patent and the possibility of inequitable conduct in patent prosecution.

Instead, the court ruled that such documents were privileged, relying on common law privilege principles as well as the doctrine of comity. This article explains the decision, and outlines how foreign patentees can position themselves to claim privilege over communications with their patent professionals. The lessons from DataTreasury are particularly relevant to American patentees, who often wish to assert their Canadian patent in the context of North American litigation.

Background: Privilege in the Domestic Canadian Context

In Canada, lawyers (who are licensed to practice law) and patent agents (who are licensed to practice in the Canadian patent office) are separate professions. Client communications with lawyers related to legal matters are covered by solicitor-client privilege, and cannot be disclosed in litigation without the permission of the client. However, following old United Kingdom case law (such as Moseley v. Victoria Rubber Co. (1886) 3 R.P.C. 351 (High Court of Justice, Chancery Division)), the Federal Court of Appeal has held that communications between Canadian clients and Canadian patent agents are not covered by solicitor-client privilege, notwithstanding that many legitimate activities of patent agents may involve giving legal advice:

It is clear that, in this country, the professional legal privilege does not extend to patent agents. The sole reason for that, however, is that patent agents as such are not members of the legal profession. That is why communications between them and their clients are not privileged even if those communications are made for the purpose of or giving legal advice or assistance.

This has left Canadian courts, when considering privilege for communications regarding patent drafting and prosecution between clients and professionals who are both lawyers and patent agents, in a difficult position. Case-law states that courts should assess whether the professional was acting as a patent agent or lawyer before deciding whether the communication is privileged. Given the almost indistinguishable difference between “patent agent work” and “legal advice or assistance”, it is unsurprising that courts have reached a confusing mix of decisions. It is generally difficult to predict whether privilege will apply to communications regarding patent drafting and prosecution with Canadian patent lawyers.

Foreign Patent Agents and Lawyers

An additional layer of complexity exists when Canadian Courts consider privilege for foreign patent professionals. Foreign companies and lawyers are often surprised to learn that the simple fact that such communications are protected by privilege under the law in their home country may not be sufficient to have equivalent protection granted by a Canadian court.

For example, in the 2006 Lilly Icos LLC v. Pfizer Ireland Pharmaceuticals case, privilege for communications in the United Kingdom between an inventor and his U.K. Patent Agents was considered by the Federal Court of Canada. Under U.K. law, communications between a person and his patent agent are “privileged from disclosure in legal proceedings in England, Wales, or Northern Ireland in the same way as communications between a person and his solicitor…”.

Nevertheless, the Court held that such communications were not privileged under Canadian law and were required to be produced in the Canadian litigation. Ominously for foreign patentees, Phelan J. of the Federal Court wrote:

The law in this country does not recognize this [the U.K.] patent agent-client privilege and there is no reason to create such a privilege on an ad hoc basis. Judicial comity between countries does not require Canada to recognize a privilege not established in Canada. This is so particularly for a privilege which has been advocated for but never adopted by legislation.

Pfizer chose to market their products in Canada and therefore take both the benefits and burdens of the Canadian legal regime when they sue or are sued in this country.

This case was settled prior to the hearing of an appeal.

Nevertheless, the Lilly Icos case left open the possibility of privilege being extended to communications between inventors and foreign patent agents if such communications qualify for common law privilege under the Canadian application of the doctrine. This issue, and others, were considered in the recent DataTreasury decision.

The DataTreasury Case – Wigmore and Comity

In DataTreasury, Claudio Ballard, the inventor of the patent at issue and a resident of the United States, engaged the American law firm of Pennie & Edmonds LLP to draft, file and prosecute his patent application. The professionals who dealt with the inventor were patent attorneys: lawyers also called to the U.S. Patent Bar as “patent agents”. The defendants, in litigation involving the corresponding Canadian patent, demanded production of communications between the inventor and the Pennie & Edmonds “patent agents” regarding the drafting and filing of the initial U.S. patent application. They argued that under Canadian law the Pennie & Edmonds professionals were clearly acting as patent agents, not lawyers, and under the Lilly Icos case communications with patent agents, domestic or foreign, were not privileged.

Prothonotary Aalto instead ruled that the communications were privileged, under both the common law “Wigmore” test, and as a matter of comity.

Wigmore’s four part test

Under common-law principles, communications are held as confidential on a case-by-case basis if they satisfy the following four “Wigmore” criteria:

(1) The communications must originate in a confidence that they will not be disclosed;

(2) This element of confidentiality must be essential to the full and satisfactory maintenance of the relation between the parties;

(3) The relation must be one which in the opinion of the community ought to be sedulously fostered; and

(4) The injury that would inure to the relation by the disclosure of the communications must be greater than the benefit there by gained for the correct disposal of litigation.

DataTreasury was able to satisfy Prothonotary Aalto that these four criteria were met.

Critically, DataTreasury was able to point to testimony taken during discovery from the inventor that he was careful not to disclose his invention, that he approached Pennie & Edmonds because they were lawyers and he wanted to obtain confidential, and legal, advice. This satisfied the first criteria. Based upon this, the Court was able to find that the relationship in this particular case was an attorney-client relationship. In turn, this cemented the relevance of related U.S. cases on attorney-client privilege, such as Spalding Sports Worldwide and Knogo. This factual finding underpins the other three Wigmore criteria.

Unlike in the Lilly Icos case, in DataTreasury the foreign patent professionals were lawyers as opposed to patent agents. As a result, the relation between the client and professional was an American attorney-client relationship. Canadian courts are quite familiar with the American concept of attorney-client privilege and its basis in ensuring full and frank communication between clients and attorneys, satisfying the second Wigmore criteria.

Attorney-client or solicitor-client privilege is one which both American and Canadian legal systems believe should be sedulously fostered, satisfying the third Wigmore criteria.

The fourth Wigmore criteria was not explicitly dis-cussed in the decision, although implicit in the recognition of attorney-client privilege is the notion that great injury would inure to the client/attorney relationship if confidentiality is breached.


Prothonotary Aalto also grounded his decision in the notion of comity. He noted that comity – Canadian courts recognizing the laws of another jurisdiction – is grounded in a concern to be fair to a party that operates and arranges their affairs in accord with a foreign system:

In this case, comity also requires that this Court consider and give effect to the established expectation in the U.S. regarding privilege. The Knogo case, supra, supports the proposition that privilege attaches to communications between inventors and their counsel who are also patent agents. Here, the communications between Mr. Ballard and his U.S. lawyers originate in the confidence that they will not be disclosed. That is supported by the questions and answers referred to on the examination of Mr. Ballard. In the U.S. litigation, this information would not be compelled to be disclosed and, in my view, the same position should obtain in the Canadian litigation.

This last point - “in the U.S. litigation, this informa-tion would not be compelled to be disclosed and, in my view, the same position should obtain in the Ca-nadian litigation” - may be the most interesting part of the DataTreasury decision. While the court in Lilly Icos was hostile to the notion that Canadian courts should take into account foreign laws when making privilege decisions (stating that if patentees want to enforce patents in Canada, they need to play by Canada’s rules), the DataTreasury decision instead reflects a willingness to consider whether a particular privilege ruling is fair to foreign parties before the Canadian court.

The Canadian Position after DataTreasury

Oddly, the DataTreasury decision leaves Canadian patent agents, and Canadian patent agent/lawyers, at a disadvantage under Canadian law compared to foreign patent agents and foreign patent agent/lawyers. A Canadian patentee who uses Canadian patent professionals to draft and file a priority application may be unable to claim privilege under Canadian law, depending on whether a court judges the communication to fall under a “patent agent” purpose. Meanwhile, a foreign patentee who uses foreign patent professionals may be able to claim privilege under Canadian law as a matter of comity or common-law privilege.

While this is entirely consistent with international economic law, where countries typically reserve the privilege of treating their own nationals less favourably than foreign entities, it is startling to see this arise in an industrialized country in an area as important as patent law. The DataTreasury decision may give an impetus to Canadian efforts to change this situation.

Lessons to Draw from the DataTreasury Decision

The DataTreasury decision lays out a roadmap to be followed in future motions by patentees who wish to keep their discussions with their foreign patent professionals privileged. Success on the motion will be determined by the quality of evidence on the following points:

a) Was the inventor seeking “legal advice” when approaching the foreign patent professional?

b) Did the inventor regard the confidence of communications with the foreign patent professional as important when establishing the relationship or making the communication?

c) Are communications between the patent professional and inventor covered by privilege in the foreign jurisdiction?

d) What is the reasoning behind granting the privilege? Would denying privilege in Canada frustrate the reasoning behind granting the privilege in the foreign country?

e) Can the privilege in the foreign jurisdiction be characterized as attorney-client or solicitor-client privilege?

These points will generally be easier to establish for communications between an American patentee and professional than for communications in other countries. Most importantly, communications between a U.S. inventor and a U.S. lawyer/patent agent are formally covered by attorney-client privilege as opposed to some other privilege, which has a clear and highly protected counterpart under Canadian law. The U.S. inventor can thus usually sidestep the thorny issue of whether a particular communication was to the U.S. patent attorney as agent or lawyer.

The general familiarity Canadian courts have with American law and decisions make it easier to prove to a Canadian court that American attorney-client privilege applies to the specific communications at issue. Canadian courts will be more comfortable reading American cases such as Florida Bar v. Sperry, Spalding Sports Worldwide and Knogo than foreign legislation or cases establishing privilege for patent agents. The similarity of professional desig-nations between Canada and the U.S. – where professionals are separately qualified as a lawyer and to practice before the patent office – also assists in making the Court comfortable with ruling on privilege.

The difference between the successful patentee in DataTreasury and the unsuccessful patentee in Lilly Icos largely circles around the superior evidence in DataTreasury on these critical points. Even in the case of communications with an American patent attorney, it seems that evidence from the inventor as to who they sought advice from and his/her expectations is central to the success of asserting privilege. When conducting litigation in Canada, it would be prudent for a foreign patentee to consider how to prove these points at an early point in the litigation and lay the evidentiary groundwork for success in a privilege motion. From a broader and earlier point of view, inventors (particularly repeat patentees) should consider always consulting “lawyers” for patent drafting and prosecution advice to enhance the likelihood that such communications will be considered privileged in foreign litigation.

Please note that Gilbert’s LLP represented Data-Treasury in the decision discussed in this article. This article should not be taken as the views of DataTreasury or of Gilbert’s LLP.

Friday, February 12, 2010

Prosecute with Candour in Canada

Shonagh McVean and Nathaniel Lipkus have an article in the February issue of Managing Intellectual Property Magazine titled "Prosecute with Candour in Canada". The aritlce discusses the recent Lundbeck v. Ratiopharm or Memantine decision which has raised a lot of eyebrows by appearing to place a high duty of candour upon applicants before the Canadian patent office - arguably higher than that imposed by the USPTO.

The article is available
although you'll need a subscription to see it.

Fortunately, I can provide you with a separate article on the same topic already published on lexology by Nathaniel Lipkus and Andrew Moeser

Alleging Inequitable Conduct before the Patent Office: a new way to avoid patent infringement in Canada?

Nov. 30, 2009

The Canadian Federal Court’s recent decision in Lundbeck Canada Inc. v. Ratiopharm Inc., 2009 FC 1102 (the “Memantine” decision) is remarkable, not only permitting Canadian patent defendants to rely on the patentee’s conduct during prosecution to avoid patent infringement allegations, but also placing a much heavier burden on the patentee than has ever been im-posed in the United States.

For years, American industry and some members of Congress have tried to eliminate the inequitable conduct defense to patent infringement. Efforts to water down or abolish what is known as the “inequitable conduct defense” have been picking up steam in Congress as it moves forward with comprehensive patent reform.

The Inequitable Conduct Defense in the United States

In a U.S. patent infringement suit, a defendant may defend against infringement by alleging that a patent is unenforceable due to inequitable conduct. A party seeking to avail itself of this defense must prove the following by clear and convincing evidence:

(i) Materiality: an affirmative misrepresentation of a material fact, failure to disclose material information, or sub-mission of false material information to the United States Patent Office; coupled with

(ii) Intent: an intent to deceive or mis-lead the Patent Office.

A finding of inequitable conduct renders all claims of the patent unenforceable and may adversely affect related patents contaminated by the inequitable conduct.

Critics of the inequitable conduct defense cite a concern that pleading inequitable conduct has become a matter of course, contributing disproportionately to the time and expense of patent litigation. The mere pleading of inequitable conduct allows an alleged infringer to put the patentee on the defensive, causing discovery to center around the conduct and motives of the patentee’s personnel at the time leading up to the patent grant.

Concern from the venture capital community focuses on the unpredictability of the inequitable conduct analysis. Where a patent discloses a valuable invention, investors should not be required to bear the risk that the patent will be deemed unenforceable because of the failure of a patent agent to disclose a trivial reference that does not bear on the patent’s inventiveness. This kind of unpredictability could disincentivize innovation and undermine the patent system.

Proponents of the defense note that the duty of candour is indispensable to a well-functioning patent system, and a means of enforcing the duty is equally indispensable. As Senator Leahy, Chairman of the Senate Judiciary Committee, stated in 2006 comments on the Senate floor,

“we should expect the highest caliber of behavior by those who are seeking patents – which are, after all, often highly profitable government monopolies.”

The spectre of a court challenge on inequitable conduct grounds is the only real discipline against material misrepresentation or omission on the part of the applicant in securing a patent. Some would instead have the USPTO conduct inequitable conduct investigations. However, the USPTO has already expressed its unwilling-ness to investigate or reject original or reissue applications under Rule 56 (the rule creating the duty of candour). The Commissioner of the Patent Office is on record as saying that the Patent Office is not the best forum to adjudicate inequitable conduct claims, due to its lack of re-sources to cross-examine witnesses and inability to handle live testimony. He added that, even if the Patent Office possessed the resources, such procedures would be an ineffective utilization of such resources. Accordingly, in terms of enforcing the applicant’s duty of candour and good faith, the inequitable conduct defense to patent infringement is the only game in town.

Recent jurisprudence from the Federal Circuit suggests that U.S. appellate judges have been mindful of the controversy surrounding the defense. The standard for pleading the inequitable conduct defense has been elevated considerably , and the burden of proof – clear and convincing evidence – has been applied stringently in determining whether an applicant had the specific intent to deceive the Patent Office.

The Memantine Decision Affirms the
Existence of a Duty of Candour in Canada

In stark contrast to U.S. efforts to enforce the duty of candour in only the most egregious circumstances, the Canadian Federal Court’s decision in Memantine suggests that Canadian patent agents will be held to a much higher standard than their U.S. counterparts.

The Memantine decision resulted from a Patented Medicine (Notice of Compliance) proceeding wherein Lundbeck sought an order prohibiting ratiopharm from obtaining a Notice of Compliance for its generic memantine (EBIXA®) product. Lundbeck asserted two patents, one of which – Canadian Patent No. 2,426,492 (the “492 Patent”) – involved the use of memantine, an Alzheimer’s drug, in combination with one of several cholinesterase inhibitors also indicated in the treatment of Alzheimer’s. ratiopharm’s allegations of anticipation and obviousness in respect of the other alleged patent (Canadian Patent No. 2,014,453) were found to be justified.

The Federal Court found ratiopharm’s allegations of anticipation and obviousness with respect to the 492 Patent to not be justified, as the prior art did not specifically disclose a synergistic effect when memantine and any cholinesterase inhibitors were combined. However, the Court did find that ratiopharm’s allegation that the 492 Patent lacked utility was justified, as there was no indication in the patent or the art that combination therapy yielded a synergistic, as opposed to an additive, effect.

The Court was able to dismiss Lundbeck’s prohibition application on the above basis alone. However, the Court went on to address ratiopharm’s allegation that the 492 Patent had been abandoned, and this is where it delved into the existence and scope of the duty of candour in Canada.

The Court’s analysis arises from paragraph 73(1)(a) of the Patent Act, which deems an application for a patent to be abandoned if, amongst other things, the applicant does not “reply in good faith to any requisition made by an examiner in connection with an examination, within six months after the requisition is made or within any shorter period established by the Commissioner”. (emphasis added)

ratiopharm alleged that the applicants for the 492 Patent misrepresented during examination that the prior art “taught away” from using a combination of memantine and a cholinesterase inhibitor in the treatment of Alzheimer’s disease. Although ratiopharm and the Court acknowledged that a key prior art document by Wenk had been brought to the attention of the Patent Office, ratiopharm alleged that the applicants failed to discuss the significance of or provide a copy of the Wenk article in responding to an of-fice action finding of obviousness.

In its office action response, the applicants dis-cussed several pieces of prior art that, taken together, could have been taken to suggest that a skilled person would not have been motivated to combined memantine with a cholinesterase inhibitor. The response then went on to conclude that:

It is therefore the Applicant's opinion that the teachings of the prior art as a whole would not have prompted the skilled person, faced with the problem of formulating a composition for the treatment of mild cognitive impairment or dementia, to elaborate the instant composition and that consequently the claims on file are not obvious in view of the prior art. Therefore, withdrawal of this objection is respectfully requested. [em-phasis added]

Existence of a Canadian Duty of Candour

In reviewing this exchange of communication, Justice Mactavish of the Federal Court first affirmed that s. 73(1)(a) imposes a duty of candour on the part of applicants in the prosecution of a patent application in Canada.

In affirming the existence of this duty, Justice Mactavish drew on Justice Hughes’ reasoning in G.D. Searle & Co. v. Novopharm Ltd. (2007 FC 81; rev'd 2007 FCA 173). Justice Mactavish ac-cepted Justice Hughes’ analysis as an accurate overview of the obligations on an applicant. In particular, she approved of Justice Hughes’ analogy between an application for a patent and an ex parte court proceeding. Moreover, Justice Mactavish extended this analogy by citing case law on ex parte proceedings in explaining the rationale for the duty – that “the ordinary checks and balances of the adversary system are not operative”.

Although the decision deals specifically with responses to patent office requests, there is a suggestion that the duty of candour applies to patent prosecution more generally. For example, Justice Mactavish recognized that Hughes’ decision in Searle found a failure of good faith in relation to both responses to the examiner and the initial submission of the patent application. It remains to be seen whether the duty will be interpreted this broadly, given that the statutory source of the duty, s. 73(1)(a), refers explicitly to the context of replies to patent office requisi-tions.

Application of the Duty of Candour

In applying this standard, Justice Mactavish ob-served that the patent examiner was concerned with obviousness, and in particular the obviousness of combining memantine with cholinesterase inhibitors for the treatment of mild cognitive impairment or dementia. Instead of alerting the examiner to the importance of the Wenk article, the patent agents advised the patent examiner of other articles warning against combining NMDA antagonists (of which memantine is one) with cholinesterase inhibitors because NMDA antagonists attenuate the effect of the cholinesterase inhibitors.

Missing from the patent agents’ office action response was the fact that Wenk was directly relevant to the claimed combinations (unlike the articles cited), and that Wenk came to the opposite conclusion of those other articles. Specifically, Wenk explained that certain “reversible” cholinesterase inhibitors such as those contemplated in the 492 Patent did not lose their therapeutic effect when used in conjunction with memantine. In view of Wenk, Justice Mactavish found that the patent agents did not fairly represent the teachings of the prior art when they said that “the prior art clearly teaches away” from the invention alleged in the 492 Patent. Prior disclosure of the existence of the Wenk article did not change the fact that the statements made in the response “were not a full, fair or complete depiction of the teachings of the prior art.”

In summary, Justice Mactavish set out a standard of practice for patent agents that is sure to put many patents at risk and to be controversial in ensuing jurisprudence:

“A proper understanding of the prior art is clearly critical to patent examination. The duty of good faith imposed by paragraph 73(1)(a) of the post-1996 Patent Act requires that this prior art be fully and fairly described by applicants and their agents when answering requisitions from the Patent Office.”

The Memantine Decision Appears to Go Beyond the U.S. Standard

For several years, there has been a likelihood that Canadian courts would interpret s. 73(1)(a) of the Patent Act as imposing some kind of duty of good faith on patent agents in their dealings with the Patent Office. What is surprising is that this duty appears to go well beyond the well-established duty of candour in the United States, so much so that what qualified as a violation in Memantine would not even make out a prima facie case in the United States.

In the U.S., a patentee may well be charged with inequitable conduct if a patentee knew about but failed to disclose key prior art to the examiner. However, on the Memantine facts, where the prior art was brought to the examiner’s attention, a Court could not conclude that the patentee failed to disclose the material in-formation. Even if a Court found that the patentee affirmatively misrepresented a material fact, the Court would then go on to determine whether the patentee had an intent to deceive. This inquiry was entirely missing from the analysis undertaken by Justice Mactavish.

Another unique aspect of the Court’s analysis is that it took place in the context of a NOC proceeding, where the burden of proof is on the patentee to establish that the generic manufacturer’s allegations are “not justified”. This is well short of the heavy burden on defendants in the U.S. to establish inequitable conduct with clear and convincing evidence. It remains to be seen how such allegations will be handled by a Court in the context of a patent infringement proceeding. In any case, there does not appear to be support in the language of s. 73(1)(a) for a “clear and convincing” standard, as in the U.S., unless this evidentiary standard is read di-rectly into the duty of good faith, which would be a stretch of the statutory language.

What Does the Future Hold?

Until now, many patent agents have been prosecuting patents in Canada on the assumption that no duty of candour existed at statute. It remains to be seen how many patents will be invalidated on the basis of the Court’s finding in Memantine that such a duty does in fact exist. Will the jurisprudence in Canada evolve to in-corporate the elements of the duty of candour in the U.S. (materiality and intent) at similar stan-dards of conduct and proof as we see south of the border? If so, perhaps Canada will develop its own appetite for patent reform once the dust has settled on the debate over the inequitable conduct defense in the United States.

The views expressed in this article are the views of the authors themselves, and not necessarily those of Gilbert’s LLP.