Canada: Prohibition Granted Re The Compound Patent; Dismissed Re Use And Polymorph Patents (Intellectual Property Weekly Abstracts Bulletin (Week Of May 26, 2014)

Last Updated: May 29 2014
Most Read Contributor in Canada, September 2016

Edited by Chantal Saunders and Beverley Moore , Adrian Howard and Ryan Steeves

NOC Cases

Prohibition Granted re the Compound Patent; Dismissed re Use and Polymorph Patents
Alcon Canada Inc. v. Cobalt Pharmaceuticals Company, 2014 FC 462
Drug: moxifloxacin

This NOC proceeding deals with challenges to three patents, a compound patent, a use patent and a polymorph patent.

The main allegations of invalidity with respect to the compound patent were that it lacked utility, lacked a sound prediction of utility and was obvious. The utility discussions turned on the promise of the patent, which the Court held to be new quinolone compounds with a potent antibacterial activity in vitro against a broad spectrum of bacterial organisms, in particular gram-positive bacteria. Against this promise, the utility was held to be soundly predicted. The patent was held to not be obvious, and a prohibition order was granted.

The use patent was challenged on the basis of obviousness and anticipation. The Court held that on the basis of ciprofloxacin, the allegations as to obviousness were justified. The Court only considered the allegation of non-infringement against the polymorph patent. As the final product is a solution, it does not contain crystals. However, Alcon argued the patent was infringed by the Cobalt process. The Court held that Alcon had only shown a "possibility" of infringement, and thus, it had not met its burden.

Product Specificity is the Same for Different Types of Claims in Listing on the Patent Register
Viiv Healthcare ULC v. Teva Canada Limited, 2014 FC 328

Teva brought a motion pursuant to section 6(5)(a) of the Patented Medicines (Notice of Compliance) Regulations relating to the listing of a patent on the Patent Register. KIVEXA® contains two medicinal ingredients, abacavir sulfate and lamivudine. The patent claims abacavir sulfate. No claims specifically claim the combination of abacavir and lamivudine, although there are claims to pharmaceutical formulations in which one or more classes of therapeutic agents may be combined with abacavir.

The Court found that the patent is not eligible for listing on the Patent Register because it does not have the required product specificity. The Court rejected the argument by Viiv and the Minister that the degree of product specificity required for listing is different pursuant to section 4(2)(a) of the Regulations as compared to section 4(2)(b). The Court held that different listing requirements would not be consistent with the purpose of the Regulations. Accordingly, the application was dismissed.

Patent Cases

Court Bifurcates Determination of Start Date for Section 8 Action
Apotex Inc. v. Pfizer Canada Inc., 2014 FC 159
Drug: atorvastatin

This is an action commenced pursuant to section 8 of the Patented Medicines (Notice of Compliance) Regulations. Pfizer counterclaimed against Apotex for infringement. The Minister of Health (Minister) certified two dates for the start of the period of liability – May 15, 2007, relating to amorphous atorvastatin, and May 19, 2010, for a second formulation. The parties agree with respect to the end date. Pfizer brought a motion seeking a bifurcation order in which the determination of the appropriate start date (Start Date) is bifurcated from the rest of the trial, and is determined first.

The Court noted that the law on bifurcation is well-known and consists of a number of factors to be considered. The Court noted each factor individually and concluded that, on a balance of probabilities, bifurcating the issue relating to the Start Date will lead to savings of cost, time and judicial resources. The Court ordered that each party should bear its own costs in light of the novel nature of the motion.

Trade-mark Cases

Mark is not deadwood following a purposive interpretation of section 45
Ridout & Maybee LLP v. HJ Heinz Company Australia Ltd., 2014 FC 442

This is a section 56 appeal from 2013 TMOB 49, wherein the Registrar of Trade-marks maintained the respondent's trade-mark registration pursuant to section 45 of the Trade-marks Act. Section 45 requires the registered owner of a mark to show that the mark has been used in Canada in association with each of the wares and services specified in the registration at any time within the three year period immediately preceding the date of the notice. The Respondent's mark, TMA 650,968 OX & PALM, is registered for use in association with "Meat and processed meats namely, corned meat and tinned meat".

On the facts of the case, the Court agreed that although an order for trade-marked goods was placed during the relevant three-year period, the goods were not received until three days after the relevant period. Nevertheless, the Court found that use of the mark occurred when the order was placed, maintaining the registration of the mark. This was based on a purposive interpretation of section 45, which is a summary proceeding intended to remove deadwood from the register. The Court decided that not removing the mark over just a few days difference and not following the strict interpretation of "use in Canada" met the purpose of section 45.

Court Grants Default Judgment in Trade-mark Infringement Proceeding
College of Pedorthics of Canada v. Canadian College of Pedorthics Ltd., 2014 FC 472

This was a motion for default judgment in a trade-mark infringement proceeding. A Statement of Defence and Counterclaim (the "Defence") was prepared in fact, but never served. The Defendants ultimately sought leave to file the Defence, but that motion was dismissed. Prior to this motion, counsel for the Plaintiff was contacted by new Defendants' counsel in an attempt to achieve a settlement, but none resulted.

The Court held that the intervention of new counsel added nothing to the process, and that the Plaintiff clearly established that the Defendants were in default. The Court found that the Plaintiff provided prima facie evidence of its claim and provided a sufficient basis for the calculations of damages and other relief pleaded. On that basis, the Court granted default judgment to the Plaintiff.

Court Conducts Interpretation of Licensing Agreement Involving CFL Trade-Marks and Designs
Licensing Partners International (Canada), Corp. v. Canadian Football League Properties Limited, 2014 ONSC 1227

The Plaintiff, Licensing Partners International (Canada), Corp. ("LPI"), and the Defendant, the Canadian Football League ("CFL"), entered into a licensing agreement (the "Agreement") which provided that LPI would act as the CFL's exclusive agent to appoint licensees to use CFL trade-marks and designs, and it would also conduct promotional activities. Licensing royalties were to be split 66⅔ percent to the CFL and 33⅓ percent to LPI until royalties reached $1 million. After $1 million, the CFL would continue to receive its 66⅔ percent, LPI would retain 25 percent, and 8⅓ percent would be used as a Co-Marketing Fund (the "Fund"). The Agreement was renewed once, and expired on December 31, 2011. A second renewal could not be negotiated. Immediately prior to the expiration of the Agreement, the CFL had its own discussions with licensees, but no new license agreements were entered into by the CFL until after the expiry of the Agreement. Three disputes related to the Agreement were considered by the Court: (1) whether LPI was entitled to receive compensation on all license agreements signed or renewed by LPI (after the expiration of the Agreement); (2) who was entitled to unused monies accumulated in the Fund; and (3) whether LPI, pursuant to an agreement with Reebok, was required to pay into a similar co-marketing fund with Reebok (the "Reebok Fund"), following the expiry of the Agreement. Despite viva voce evidence, the Court considered the determination of these issues to be mainly an exercise of contract interpretation.

With respect to the first issue, the Court noted that LPI's entitlement to the "tail fees" was not in dispute. The dispute concerned (i) fees for agreements with terms commencing after the expiration of the Agreement, and (ii) fees for agreements between the CFL and licensees for 2012 and 2013. LPI argued that because it had signed agreements with certain licensees, it was entitled to tail fees arising from subsequent agreements the licensees signed with the CFL, even if they were between the CFL and the licensees directly, and after the expiration of the Agreement. The Court disagreed, however, and held that the plain language of the Agreement (paragraph 14(c)) only entitled LPI to tail fees for license agreements that it entered into with licensees that did not expire as of December 31, 2011. For license agreements entered into by the CFL for 2012 and 2013, the Court held that LPI was similarly not entitled to tail fees for these agreements. Overall, the Court held that there was no ambiguity in the wording of the Agreement in this regard, and that if there was, the Court's view provided the most sensible commercial result: LPI would only receive tail fees beyond December 31, 2011 (for up to two years, pursuant to the Agreement) for agreements that were signed or renewed by LPI, so long as those agreements had dates beyond December 31, 2011.

With respect to the Fund, the issue centered on the provision in the Agreement that stated that once the annual revenue reached $1 million, the revenue split would change as between the CFL and LPI. The Court needed to determine, once the revenue for a given year reached $1 million, was 8⅓ percent of all annual revenue to be paid into the Fund, or was only 8⅓ percent of revenues over $1 million to be paid into the Fund? Also, the Court had to determine what was to be done with the unspent balance of the Fund following the expiry of the Agreement. With respect to the 8⅓ percent payment, the Court accepted the CFL's position, which provided that the Agreement was clear (paragraph 5(a)): LPI had to pay 8⅓ percent of all annual revenue into the Fund once the revenue reached $1 million. LPI argued that adopting the CFL's position would essentially result in its overall percentage of the revenue decreasing if the annual revenue went over $999,999. The Court held that it was not its role to intercede and rewrite the bargain, or to "level-out an agreement so that both parties obtain equal benefit". With respect to the unspent portion of the Fund, while the issue was not addressed by the Agreement, both parties submitted that they were entitled to the full amount. The Court held that neither party had an absolute right to it, and that had the money been spent on marketing, one could have expected that annual revenues would have continued to increase as a result, and both parties would have benefited. Therefore, the Court divided the money in a way that mirrored the proportion that the parties would have received of any increase in annual revenues resulting from the marketing had the Fund been extended. The Court felt that this was consistent with the parties' intentions, was fair and equitable, and gave business efficacy to the contract.

The final issue concerned the Reebok Fund, which was part of an agreement between the CFL, LPI, Reebok, and other affiliated companies. This agreement carried on after the expiration of the Agreement, and the CFL and LPI had an oral agreement under which they contributed to the Reebok Fund (a percentage of net sales) on a 66⅔ percent (CFL) and 33⅓ percent (LPI) basis. They made payments under this formula until the Agreement expired. The CFL claimed that LPI was liable to pay its 33⅓ percent share for the 2012 and 2013 years of the Reebok agreement. There was no agreement as to what would happen to the Reebok Fund if the Agreement terminated on December 31, 2011. However, the Court accepted the CFL's position, and noted that to give effect to LPI's position would in essence require a rewriting of the Reebok agreement to allow LPI to withdraw from its obligation to contribute to the Reebok Fund while still receiving the benefit of the Reebok agreement for 2012 and 2013 (since it received Reebok royalties as tail fees). The Court considered the answers of LPI's witness on discovery and found that his understanding that LPI would continue to contribute to the Reebok Fund (despite having his answers corrected very shortly before trial) was significant. Therefore, the Court found it fair and equitable that LPI contribute to the Reebok Fund for 2012 and 2013 at a rate of 33⅓ percent.

The Court offered assistance to the parties in determining the exact amount of damages and costs, if they could not resolve these amounts on their own.

Industry News

Competition Bureau Discontinues Inquiry into Alleged Anti-Competitive Conduct by Alcon Canada Inc.

The Competition Bureau has discontinued its inquiry into whether Alcon Canada Inc. (Alcon) had engaged in anti-competitive conduct contrary to the abuse of dominance provision of the Competition Act (Act). The inquiry was examining whether Alcon was dominant in a relevant market and, if so, whether it had intentionally disrupted the supply of a prescription medication as part of a strategy to switch patients to a second generation formulation of the drug. This second generation drug has twice the concentration of the medical ingredient as the first and is protected under patent until 2022.

Following the initial supply disruption for the first generation product, Alcon's sales returned to normal and generic competitors have entered the market and have captured significant market share from Alcon. Consumers and physicians are able to choose from the brand and generic first generation product, as well as the branded second generation product, and so the competitive dynamic appears to have been restored in the market.

As stated by the Competition Bureau, "[i]n the Bureau's view, product life-cycle management strategies in the pharmaceutical sector are not inherently anti-competitive. In pro-competitive circumstances, such strategies may bring significant advancements in health care for the benefit of consumers, as well as drug companies. However, life-cycle management strategies that are designed to impede competition from generic drug companies, such as product switching strategies, may cause significant harm to competition. Strategies that include supply disruptions for the purpose of forcibly switching demand, including terminating, repurchasing or recalling market supply or any other attempt to frustrate supply of a product under patent challenge by potential generic drug competitors, are likely to raise concerns of an abuse of dominance."

Health Canada has published a new document: Authority to Sell Veterinary Drug Fees.

Health Canada has published a FAQ re the Common Electronic Submissions Gateway (CESG).

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