In Merck & Co. Inc. v. Apotex Inc.>, the Federal Court found Apotex to have infringed Merck's Canadian Patent No. 1,161,380 ('380 Patent), a product-by-process patent for the medicine lovastatin.
In arriving at its decision, the Court addressed key questions regarding standing, infringement and patent validity. The decision provides an interesting example of a plaintiff's successful use of DNA and circumstantial evidence in establishing two separate sources of infringement. In addition, readers should take note of the Court's finding that a pre-existing process will invalidate a product-by-process patent only where it necessarily produces the relevant product.
This case was heard contemporaneously with another case which we will be discussing on this blog shortly.
Lovastatin, sold under the brand name Mevacor, was the first commercially-available medicine in a class of drugs known as "statins". It is used in the treatment of cardiovascular disease because it reduces the production of cholesterol in the liver, thereby minimizing plaque build-up in arterial blood vessels. The '380 Patent claims the product lovastatin when made by a process of fermentation using a micro-organism known as Aspergillus terreus.
Apotex began selling its generic version of lovastatin in 1997, and employed a production process which allegedly would not infringe the '380 Patent, as its process entailed use of a micro-organism known as Coniothyrium fuckelii. Apotex first manufactured its version of lovastatin using facilities in Winnipeg. It then transferred its C. fuckelii technology to a facility in China (Blue Treasure) in order to produce lovastatin under a joint venture agreement, subject to specific instructions that Aspergillus terreus not be used in the process.
Merck alleged that Apotex infringed the '380 Patent by: (1) using infringing lovastatin imported from Blue Treasure in China; (2) "salting" non-infringing lovastatin with infringing lovastatin; (3) manufacturing one batch of infringing product in Winnipeg; and (4) producing other small amounts of infringing product in Winnipeg.
Apotex's primary argument was that there had been no infringement of the '380 Patent, and that, in any event, the '380 Patent was invalid. Apotex also argued that Merck had no standing to bring its action, having allegedly assigned all its interest in the '380 Patent to an affiliate company.
After a lengthy 40-day trial and thorough consideration of the issues, the Court concluded that Merck had standing to bring the action, that the '380 Patent was valid, and that Merck's infringement allegations should succeed in part.
Relying on jurisprudence from the United States and the United Kingdom, Apotex submitted that although Merck allegedly only "licensed" the right to use the invention disclosed in the '380 Patent to an affiliate, a review of the actual words used in the agreement demonstrated that the intent and effect of the agreement was to convey the entire right, title and interest in the '380 Patent – meaning that Merck had no right to bring the action. The Court, however, found the foreign jurisprudence relied upon by Apotex to be of little assistance, and instead relied upon Canadian contract law for the proposition that where words are clear and unambiguous, a term such as "license" should be interpreted in its normal sense to mean that no interest or property in the patent was conveyed. Merck therefore had standing to bring the action.
In order to establish infringement, Merck was required to prove on a balance of probabilities that certain volumes of lovastatin were manufactured from, or contained (through salting), Aspergillus terreus.
Merck was unable to prove its theory of "salting" by Blue Treasure. However, the Court was convinced, based upon circumstantial evidence, that Blue Treasure actually used Aspergillus terreus to produce lovastatin. In particular, a combination of factors, including the questionable credibility of the Blue Treasure witnesses, the unreliable batch records they provided, inconsistencies in fermentation data and production levels, financial motivation to use the infringing process, and the opportunity to infringe without proper oversight, was held to support a reasonable conclusion that Blue Treasure employed a process to produce lovastatin that infringed the '380 Patent.
The Court also found, based on DNA evidence, that a single batch of lovastatin produced in Winnipeg was made using Aspergillus terreus. In making such a finding, the Court rejected Apotex's argument that the results were somehow contaminated.
Validity of the Patent
Apotex had the burden to convince the Court, on a balance of probabilities, that the '380 Patent was invalid. In this respect, Apotex asserted that the claims of the '380 Patent were invalid for: 1) being overly broad; 2) lacking demonstrated and/or soundly predicted utility; 3) lacking novelty based on the existence of lovastatin in a traditional Asian product known as "Red Yeast Rice" (anticipation); and 4) Merck not being the first to invent lovastatin. Each of these allegations were, however, dismissed by the Court.
Of particular interest, the Court noted that >Red Yeast Rice would only satisfy the disclosure requirement of the test for anticipation if it could be said that it necessarily produced lovastatin. Based on the evidence, this was not the case. Instead, the evidence was that, given the significant differences in the traditional methods of producing Red Yeast Rice, the existence of lovastatin therein would be a very rare event. As such, there was no anticipation of the subject matter of the claims of the '380 Patent.
In the result, given that there was an order bifurcating the liability related issues from the remedies portion of the trial, Merck's damages are to be determined in a subsequent proceeding.
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