Canada: Process Claims: What Constitutes A "New Product"

In cases involving process patents, statutory and common law presumptions are important to note. For example, parties involved in Canadian patent litigation may not know the details of a process used by a third-party supplier to manufacture allegedly infringing products imported into Canada. In the absence of evidence to the contrary, a presumption reversing the onus of proof could result in a finding of infringement against a defendant. As discussed in more detail below, in light of seemingly incongruous decisions of lower courts, direction from appellate courts clarifying the interpretation of the words "new product" in s. 55.1 of the Patent Act would be useful.

Section 55.1 of the Patent Act sets out a statutory presumption directed to process patents for obtaining new products. This statutory presumption provides that in the absence of proof to the contrary, any product that is the same as the new product shall be considered to have been produced by the patented process. Prior to 1993, the section read "new substance" but was changed to "new product" to comply with Canada's obligations under NAFTA. There are two relatively recent decisions of the Canadian Federal Court which considered this statutory presumption and the threshold question of what constitutes a new product or new substance.

Each of these cases considered whether a new product or substance requires absolute novelty in the sense that the new product or substance didn't exist before or whether unknown or unused products or substances meet the statutory precondition of "new." These two Federal Court decisions have reached opposite conclusions on this point.

In the first decision released in October, 2009 in Eli Lilly and Company v. Apotex Inc., 2009 F.C. 991, Madam Justice Gauthier heard an infringement case which included eight process patents useful in preparing intermediates used in the production of the antibiotic cefaclor. Apotex was alleged to have infringed the process patents by importing into Canada cefaclor made by a process that infringes the patents. One such process patent was referred to in the decision as the '007 Patent and claimed processes for making a "kinetic product." This "kinetic product" is an unstable reagent which was made from a known reaction of two chemicals. Unless used right away or maintained under particular conditions, this unstable "kinetic product" converts to a more stable thermodynamic product. It is only the "kinetic product" that is useful in the transformation of intermediates used in the production of cefaclor. The hindsight evidence was clear that when performing known reactions, this "kinetic product" was inevitably produced but no one knew of its existence or had used it in manufacturing cefaclor. Under Justice Gauthier's analysis, inherency defeats the statutory precondition of newness. The fact that the "kinetic product" existed meant that it was not a "new product" within the meaning of s. 55.1 of the Patent Act. In particular, Justice Gauthier wrote:

With respect to the '007 Patent, for reasons given below under anticipation, the Court finds that these compounds are not new products.

In the more recent decision, Merck & Co. v. Apotex Inc. 2010 F.C. 1265, Justice Snider reached the opposite conclusion. In that decision, Merck's patent included a fermentation process for making lovastatin, a compound used in the treatment of elevated blood cholesterol. About four months prior to Merck's patent application, a third party filed a patent application (referred to as the Endo Patent) but that application had not yet been published. The Endo Patent contained a different process for preparing a compound called monacolin K which, it turns out, was also lovastatin. Thus, lovastatin was a compound that existed (being the result of the Endo Process) but was not publicly known because the Endo Patent had not been published.

Interestingly, Justice Snider indicated that there is no direct case law on the interpretation of "new" in s. 39(2), despite the fact that Apotex was a party to the previous cefaclor decision. Justice Snider gives a much more substantive discussion of the application and impact of the statutory presumption, and framed the issue as follows:

In applying these principles, the question is: Does "new" in s. 39(2) mean "new" in the ordinary sense, or in the sense of novelty? In other words, to displace the application of s. 39(2), does Merck have to prove that the substance of the product-by-process claimed in the '380 Patent was novel, or simply that it was not known before?

Contrary to Justice Gauthier's decision in Eli Lilly, Justice Snider found that "new" simply meant a substance that was not previously known or used and therefore applied the statutory burden. In her view, absolute novelty was not required to trigger this section.

In relation to the impact of the burden, Justice Snider found that the words "in the absence of proof to the contrary" in s. 39(2) amounts to an evidentiary presumption of infringement. In this regard, she applied a three-part test:

  1. Merck has an evidentiary presumption to prove that the substance is new;
  2. if established, an evidentiary burden is imposed on Apotex which can be discharged by showing the existence of viable alternative processes to create the new substance; and
  3. if established, the burden returns to Merck to prove infringement on a balance of probabilities based upon the totality of evidence.

Given the confusion and important consequences of presumptions in patent infringement actions involving process patents, further guidance from appellate courts will be useful.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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