Canada: In-House Counsel Properly Disqualified; But NOA Not Invalidated As A Result (Intellectual Property Weekly Abstracts Bulletin - 3 March 2014)

Last Updated: March 6 2014
Most Read Contributor in Canada, November 2017

Edited by Chantal Saunders and Beverley Moore and Adrian Howard

NOC Proceedings

In-house Counsel Properly Disqualified; but NOA not Invalidated as a Result

Valeant Canada LP/Valeant Canada S.E.C. v. Canada (Health), 2014 FCA 50

This was an appeal by Valeant Canada LP/Valeant Canada S.E.C. and Valeant International Bermuda (collectively "Valeant") and cross-appeal by Cobalt Pharmaceuticals Company ("Cobalt") from an order of the Federal Court stemming from a motion for disqualification brought by Valeant within an application for prohibition it brought under the NOC Regulations. The Federal Court granted Valeant's motion disqualifying Cobalt's in-house lawyer from any further involvement in the application on the ground that he could be presumed to have Valeant's confidential information. On appeal, Valeant sought more than the disqualification: Valeant asked the Court to declare Cobalt's NOA – prepared by the law firm Deeth Williams Wall LLP ("Deeth") – invalid. The Federal Court refused to grant Valeant any further relief beyond the disqualification.

Soon after Valeant received Cobalt's NOA comparing to Valeant's TIAZAC® XC, Valeant learned that Deeth purported to represent Cobalt and that it was involved in preparing the NOA. Deeth was the law firm of Valeant's predecessor, Biovail. Deeth had previously represented Biovail in numerous proceedings in the Federal Court relating to the same medicinal ingredient that is the subject-matter of this NOA. While those proceedings were subject to confidentiality orders, Valeant believed that Deeth had other confidential information about its affairs and business strategies, and continued to possess confidential communications covered by solicitor-client and litigation privilege.

Valeant notified Deeth of its objection, and soon after receiving the objection, Deeth resigned as Cobalt's counsel. Deeth undertook not to act further for Cobalt or to assist in any way in the application. However, Valeant had two further issues: (1) Cobalt employed an in-house lawyer who was a former student-at-law and, later, lawyer at Deeth; and (2) Cobalt's NOA was a direct product of Deeth's improper use of confidential information and, accordingly, the NOA must be declared invalid.

Cobalt cross-appealed on the basis that the Federal Court's decision should be set aside because it erred in principle. In particular, Cobalt argued that the Federal Court misunderstood and misapplied the test for disqualification. The Court of Appeal agreed that the Federal Court did not apply the test "exactly as set out by the Supreme Court", but found that the result was nevertheless correct.

With respect to Valeant's submission that the NOA should have been declared invalid, the Court of Appeal held that it was not persuaded on the record before it that the NOA was the product of the misuse of information and an improper conflict of interest. In particular, the Court of Appeal noted that there was simply not enough evidence on the record before it to show that Valeant's confidential information was either "used" or "misused".

Therefore, the Court of Appeal dismissed both Valeant's appeal and Cobalt's cross-appeal. In view of the divided success, no costs were awarded. Notably, however, the Court of Appeal commented that, subject to any limitation periods, "Valeant might pursue other steps to restrain or redress any misuse of confidential information."

NOC Application Dismissed: Overbreadth and Lack of Utility Related

Alcon Canada Inc. v. Cobalt Pharmaceuticals Company, 2014 FC 149
Drug: olopatadine

In a proceeding brought pursuant to the NOC Regulations, the Court made determinations with respect to obviousness, lack of utility and lack of sound prediction, and ambiguity and insufficiency.

The Court construed the claims in issue, and determined the inventive concept of the claims as well as the promise of the patent. The Court found that the allegation of obviousness was not justified. However, the experiments in the patent did not demonstrate the promised utility, nor was the utility soundly predicted. The Court considered the promise of each asserted claim in performing this analysis. After making these determinations, the Court made additional comments on the issue of utility. In particular, the Court noted that the findings in this regard were limited to the allegations made by Cobalt in its Notice of Allegations, but there were other aspects of the promise that were not demonstrated or soundly predicated and that could have been raised by Cobalt.

The Court found the allegation of overbreadth was justified, stating that "this allegation of overbreadth is simply another way of articulating the utility argument, but from the perspective of claims drafting rather than from the perspective of the demonstration or sound prediction of utility. As I have already found above that the 924 Patent fails to meet the promises advanced by the asserted claims, it follows that the claims are drafted more broadly than is warranted; they contain promises that are broader than what can be demonstrated or soundly predicted to be useful by the disclosure in the patent." Finally, the Court concluded that the allegation relating to ambiguity and insufficiency was not justified.


Product specificity requirement trumps patent construction for listing

Eli Lilly Canada Inc. v. Canada (Attorney General), 2014 FC 152

Lilly sought to list Canadian Patent No. 2,379,329 on the patent register for their product TRIFEXIS®. The Minister refused, stating that the patent did not contain claims for the formulation combining both medicinal ingredients (spinosad and milbemycin oxime). Rather, the Minister was of the view that the patent claimed a formulation comprising only one of the two medicinal ingredients present in Trifexis, namely spinosad, and that, referencing the general family of milbemycins in the definition of oral formulation provided in the disclosure of the patent was insufficient to meet the product specificity requirement.

The Court agreed with Lilly's construction of the patent, finding that the claims are not directed only to a formulation including spinosad as the only active ingredient, but also to formulations that include other active ingredients such as, but not restricted to, milbemycin oxime.

However, Lilly was not successful in the result once the Court applied the product specificity jurisprudence to this case. The Court stated that for a formulation claim, all of the medicinal ingredients included in the drug product as authorized must be included in the patent claims. Finding that there was no perfect match between what is claimed and what is authorized, the patent did not meet the product specificity requirements and thus was not eligible for listing.

Copyright Decisions

Statutory and Punitive Damages Awarded for Copyright Infringement in a case of "Outrageous and Highly Reprehensible" Conduct

Trout Point Lodge Ltd. v. Handshoe, 2014 NSSC 62

This was an application for an assessment of damages pursuant to the Nova Scotia Civil Procedure Rules. The litigation between these parties arose out of Handshoe's "defamatory actions conducted through the Internet", which were made in relation to a news story that was published in a Louisiana newspaper (para. 6). The first proceeding between these parties (decision here) resulted in a default judgment against Handshoe, and an assessment of damages. The applicants did not realize any of those awards.

In addition to seeking (and obtaining) further damages for defamation, the applicants sought damages for copyright infringement in relation to four (4) photographs disseminated on the Internet by Handshoe. The applicants requested statutory damages instead of general damages. The Court noted that there was "ample evidence" that Handshoe disseminated the photographs for commercial purposes, namely blogging, and the Court found that Handshoe's use of the photographs was to destroy the business interests of the applicant and to enhance the credibility of Handshoe's blog.

The Court found that, (1) copyright infringement occurred between the time of the decision in the first proceeding and the start of this application, (2) that the photographs were the property of the applicants when used by Handshoe, (3) that Handshoe ignored the applicants' complaints, and (4) that Handshoe had offended the injunction that was issued in the first proceeding. As a result, the Court said this was a "case for generous statutory damages as well as punitive damages." The Court awarded $20,000 in statutory damages per infringement, as well as $100,000 in punitive damages.

While there was also a claim related to the tort of wrongful appropriation of personality, the Court declined to award damages in this regard since the Court believed that damages for copyright infringement adequately addressed Handshoe's conduct.

Oral assignment and no proof of joint authorship fatal to copyright claim

Atlantic Canada Regional Council of Carpenters, Millwrights, and Allied Workers v. Maritime Environmental Training Institute Ltd., 2014 NSSC 64

The applicants to this proceeding claimed that use and reproduction of a scaffolding training manual was infringing their copyright in the work. The predecessors of the applicants' union had retained a now forgotten UK company to prepare the manual in or around 1991. No written assignment was put into evidence, but they claimed an express oral agreement.

Ultimately this application was not successful. Since this was a commissioned work, it was found that it was necessary to put a written assignment from the UK company into evidence.

Furthermore, the Court held that the applicants failed to prove that the manual was a work of joint authorship, as the evidence did not establish the applicants' contribution to the work. In the absence of proof of ownership or joint authorship, the Court found that the application must fail.

Other Industry News

Practice notice: Experimental testing

The Federal Court has provided a new Notice to the Profession stating that in an action for infringement or validity of a patent, when a party intends to conduct experimental testing conducted for the purpose of litigation, it shall, no later than two months before the scheduled service of the expert report(s) in chief, advise the other parties as to:

  • the facts to be proven by such testing;
  • the nature of the experimental procedure to be performed;
  • when and where the adverse parties' counsel and representative(s) can attend to watch the experiment(s); and
  • when and in what format the data and test results from such experiment(s) will be shared with the adverse parties.

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