Canada: Misstatements And Inequitable Conduct In Canada After Weatherford

In Canada, there are two main provisions in the Patent Act which relate to the conduct of a party when obtaining a patent. Section 53(1) relates to misrepresentations to the Patent Office and section 73(1)(a) relates to good faith responses to the Examiner. The provisions read as follows:

53. (1) A patent is void if any material allegation in the petition of the applicant in respect of the patent is untrue, or if the specification and drawings contain more or less than is necessary for obtaining the end for which they purport to be made, and the omission or addition is willfully made for the purpose of misleading.

73. (1) An application for a patent in Canada shall be deemed to be abandoned if the applicant does not

(a) 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.1

In recent years, the Federal Court considered a few cases where a party raised issues of a lack of good faith and/or material misrepresentation as part of their challenges to the validity of the patent in suit.

The decisions resulting from these cases were of great concern to patentees, as they seemed to invoke changes in the law as it had previously existed. However, the Federal Court of Appeal made several more recent decisions, clarifying this issue.

GOOD FAITH RESPONSES

The Federal Court, in a Notice of Compliance (NOC) Proceeding, considered the Patent Act, and held that "[t]here is no provision in the Patent Act or Rules that directly provides to a third party a right to invalidate a patent for fraud or lack of good faith during prosecution of the application."2 However, the Court then considered the American law relating to inequitable conduct, the Australian law relating to fraud or misrepresentation, the history of section 73 and the doctrine of good faith prior to its implementation in 1996.

The Court held that obtaining a patent was an ex parte proceeding. During prosecution, responses must be full, frank and fair, and there is ample opportunity to correct mistakes.3 Furthermore, it "is not harsh or unreasonable, if after the patent issues, and disclosure is found to lack good faith, that the Court deems the application and thus the patent, to have been abandoned."4

Following Searle was a decision in Lundbeck5 where the Court again considered an allegation that the patent was abandoned during prosecution due to a response to an office action that was allegedly not made in good faith. The factual situation related to a particular piece of prior art. The article in question, Wenk, was mentioned in an International Search Report. However, when the Examiner issued an office action, arguing that the invention was obvious, he did not cite the Wenk article. In the response to the obviousness objection, the patent agent responded to the art cited, then cited several other pieces of art and concluded with a statement that:

In fact, in view of the prior art, which showed that NMDA antagonists attenuate the effect of AChE, it was not obvious for a skilled person to arrive at the present invention. Indeed, the prior art clearly teaches away from the combination of a NMDA antagonist with an AChE inhibitor as claimed in the instant application. [emphasis added by Court]6

The patent issued and was challenged in a proceeding under the Patented Medicines

(Notice of Compliance) Regulations (the NOC Regulations). The generic company alleged that the patent was abandoned pursuant to section 73 of the Patent Act due to a lack of good faith response to the office action based on the failure to discuss the Wenk article.

The Court held that the allegations of invalidity were justified. The Judge looked at the objection and the response and considered that the Wenk article was cited in neither. However, the Judge was concerned with the patent agent's statement about the general state of the art and found that the response was not made in good faith, given the existence of the Wenk article. It is worth noting that the Judge in this same case considered the Wenk article in her obviousness analysis and found that the allegations of obviousness were not justified. No appeal was possible from this case as the generic company received its marketing authorization, rendering any appeal moot.7

Thus, this case caused concern to many agents who may have used what could be interpreted as similarly broad language in their responses to office actions. Despite the fact that the Federal Court of Appeal has held that cases decided under the NOC Regulations are not to be precedential,8 many are applied by both the Court and the Patent Office as binding law.

Consequently, it appeared that the United States doctrine of inequitable conduct was finding its way into Canadian law. At this same time, inequitable conduct was being commonly asserted successfully in the United States and patentees and patent agents were being held to a very high standard, often long after the patent had issued.

Furthermore, this doctrine as defined by Searle and Lundbeck would be applied to patents that had been prosecuted at a time when section 73 was not used in this manner. Indeed, section 73 as it currently stands was not introduced into the Patent Act until 1996; so many of the patents it could be used against were prosecuted when this provision did not exist.

However, the Federal Court and the Federal Court of Appeal recently issued a decision overruling these cases. The Federal Court of Appeal held that section 53 applies to issued patents while section 73 applies to patent applications:9

To be clear, the concept of abandonment in paragraph 73(1)(a) operates during the prosecution of the application for a patent. Its operation is extinguished once the patent issues.

Post-issuance, the provisions of subsection 53(1) must be utilized with respect to allegations of misrepresentation. To conclude otherwise would result in absurdity. An issued patent would be subject to retroactive scrutiny by the courts in relation to the submissions made by an applicant to the Patent Office during prosecution (generally many years prior), judged against unknown criteria. It is for the Commissioner to determine whether an applicant's response to a requisition from an Examiner is made in good faith, not for the courts. The courts do not issue patents.10

The Federal Court of Appeal also explicitly held that the Court's decisions in Lundbeck and Searle "should not be followed" to the extent that they stand for the proposition that section 73 can be relied upon for the purpose of attacking the validity of a patent.11

As a result of this very conclusive statement by the Federal Court of Appeal, it is expected that more stability will return to patent law in Canada. Patentees are still obliged by law to respond in good faith to requisitions from the Patent Office. However, third parties will not be able to challenge those decisions after the fact.

This is more consistent with the recent changes in the United States, which have made it more difficult for third parties to succeed on inequitable conduct challenges. Inequitable conduct is codified and has become a common ground of attack. However, recently, after an en banc hearing, the Court of Appeals for the Federal Circuit described this doctrine as "the 'atomic bomb' of patent law."12 The Court then held that, as a general rule, the doctrine should only be applied where the patentee's misconduct resulted in the patentee unfairly receiving an unwarranted claim, as there is no injury to the public by the enforcement of an otherwise valid patent simply because there may be misconduct lurking in the prosecution that was not material to issuance.13 This is also described as "but-for materiality" and is to be applied generally except in cases of affirmative egregious misconduct.14 This increased standard of proof for inequitable conduct allegations in the United States is expected to reduce the number of successful challenges to patent validity.

MATERIAL MISREPRESENTATION

Allegations of material misstatement were also made in a number of cases pursuant to the Patented Medicines (Notice of Compliance) Regulations. However, these allegations were rarely argued at the hearing and were never successful.15 Moreover, the Court started imposing significant cost consequences where unsuccessful allegations pursuant to section 53 were raised. In particular, even if the generic company was otherwise successful in their allegations, in later cases, their fees were reduced by 25% if section 53 was alleged and not proven.16 However, in an impeachment action that followed a successful NOC proceeding, the allegations pursuant to section 53 were allowed.17 Three material misstatements were explicitly alleged by the plaintiff in the pleadings, and a fourth was argued to be implied. The Court held that implication was not good enough and that allegations pursuant to section 53 must be pleaded with particularity.18 The Court then held that misstatements were made, that they enhanced the characteristics of the claimed salt, and that those enhanced characteristics were not true.19 Furthermore, the patent agents distanced themselves from the drafting of the patent.20 The Court held that an intent to mislead can be inferred.21

The Court of Appeal upheld the ruling that the patent was invalid, but did not explicitly consider the trial Judge's comments on section 53, and instead found the determination to be "confined to the unique and particular circumstances of this matter. It has limited, if any, value as a precedent."22

Weatherford touched on this issue; however, the comments were made in the context of allegations that an inventor was intentionally misnamed. The Court of Appeal was reluctant to infer a willful misleading statement (and the draconian remedy that would result) in the absence of a fulsome analysis by the Trial Judge on the issue.23 The Court of Appeal also commented it would be an anomalous result for other, unnamed, inventors to lose their rights to the patent rather than to be granted access to what they had previously been denied.24

In the end, the Court of Appeal upheld the Trial Judge's decision that the alleged inventor in

question was not in fact an inventor. Thus, s. 53 was not an issue.

At this time, it is difficult to say what the Court will consider to qualify as a material misrepresentation made for the purpose of misleading. The ultimate success of such allegations will largely depend on the factual circumstances of any particular case, making it difficult for patentees to properly evaluate the likelihood of success of such an allegation. However, because of the cost consequences that the Court appears to be imposing in NOC proceedings in respect of an allegation relating to material misrepresentation that is withdrawn, these allegations are being put forward less frequently.

CONCLUSIONS

Good faith and material misrepresentations remain part of the law in Canada. This is important as these principles provide a valuable check and balance against fraudulent conduct by inventors. However, it is equally important that the standard of proof be high in order for a patent to be invalidated under the material misrepresentation doctrine in order to prevent frivolous accusations being made by defendants in infringement cases.

Footnotes

1 Patent Act, RSC 1985, c P-4, s 73.

2 GD Searle & Co v Novopharm Ltd, 2007 FC 81 at para 61, [2008] 1 FCR 477 (FC); reversed 2007 FCA 173 (FCA) on other grounds with no comment on this issue.

3 Ibid at para 72.

4 Ibid at para 73.

5 Lundbeck Canada Inc v ratiopharm Inc, 2009 FC 1102, 79 CPR (4th) 243 (FC).

6 Ibid at para 311.

7 The Courts have held that once the prohibition application is dismissed, the Minister of Health is lawfully able to issue a NOC (marketing authorization) to a generic company, and once that happens, there is no longer anything to prohibit. Furthermore, there is no provision under the NOC Regulations to address this situation. See Pfizer Canada Inc v Apotex Inc (2001), 11 CPR (4th) 245, 266 NR 371 (FCA).

8 Eli Lilly Canada Inc v Novopharm Limited, 2007 FCA 359 at para 41, [2008] 3 FCR 449 (FCA).

9 Corlac Inc v Weatherford Canada Inc, 2011 FCA 228, at para 149, 95 CPR (4th) 101 (FCA) [Weatherford ].

10 Ibid at para 150.

11 Ibid at para 151.

12 Therasense v Becton, 649 F (3d) 1276 (CAFC 2011) [Therasense ].

13 Ibid.

14 Ibid.

15 See Eli Lilly Canada Inc v Apotex Inc, 2007 FC 455, 58 CPR (4th) 353 (FC) aff'd 2008 FCA 44 (FCA); Eli Lilly Canada Inc v Novopharm Ltd, 2007 FC 596, 58 CPR (4th) 214 (FC); Shire Biochem Inc v Canada (Minister of Health) 2008 FC 538, 67 CPR (4th) 94 (FC); Bristol-Myers Squibb Co v Apotex Inc, 2009 FC 137, 74 CPR (4th) 85 (FC).

16 Ibid.

17 ratiopharm Inc v Pfizer Limited, 2009 FC 711, 76 CPR (4th) 241 (FC); affirmed with no comment on this point 2010 FCA 204 (FCA); although these allegations were discussed in obiter, the Court having already found the patent invalid for obviousness [ratiopharm].

18 Ibid at paras 196-198.

19 Ibid at para 199.

20 Ibid at para 200.

21 Ibid at para 204.

22 ratiopharm Inc v Pfizer Ltd, 2010 FCA 204 at para 34, 87 CPR (4th) 185 (FCA).

23 Weatherford, supra at para 120.

24 Ibid at para 123.

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