Canada: IP Year In Review - Patents

Last Updated: December 21 2005

Article by Mark Penner, ©2005 Blake, Cassels & Graydon LLP

This article was originally published in Blakes Bulletin on Intellectual Property, December 2005.

In Canada, there has been a flurry of both legislative and judicial activity regarding patent law. The legislative activity in 2005 hoped to address local concerns of “small” errors regarding issued patents and pending applications as well as global concerns of increasing the accessibility of pharmaceuticals to where they are needed most. Not surprisingly, most of the judicial activity revolved around Canada’s Patented Medicines (Notice of Compliance) Regulations (the NOC Regulations). Despite this, however, there were interesting cases that touched on other issues, such as the intersection of patent and competition law in Canada.

Some of the more interesting legislative amendments and cases are discussed below.

Amendments to the Patent Act and Regulations

Correcting a “Small” Error. In 1989, Canada enacted a “small entity” provision to permit applicants and patentees to pay fees at a reduced rate of 50% if they met the definition of a small entity. If, however, an applicant incorrectly claimed small entity status and paid the applicable fees at the lower rate, the issued patent could be found to be invalid, according to the highly publicized Federal Court of Appeal decision in Dutch Industries Ltd. v. Canada (Commissioner of Patents) in 2003. The Federal Court of Appeal held that a person who qualified as a small entity at the time of filing its application could carry on paying fees as a small entity, even though its status might change as a result of a license to a non-qualifying person or an increase in its number of employees.

The Dutch Industries case raised the possibility, however, that if the filing fees had been paid on the basis that the applicant was a small entity where in fact it did not qualify for small entity status at the time of filing, any patent to be issued based on that was susceptible to attack. As reported in Proposed Legislation Regarding Small Entity Fees, Blakes Bulletin on Intellectual Property, Special Edition, December 2004, the uncertainty resulting from this case led the Canadian government to adopt amendments to the Patent Act to allow for “top up” fees so that applicants could correct any defects in improperly claimed small entity status. Bill C-29 added new section 78.6 to the Act so as to allow for retroactive fee payment corrections within a one-year grace period from the date on which the amendments come into force. The amendments, therefore, will provide patent holders and applicants with a one-year time limit to rectify past fees that were incorrectly paid at the small entity level.

The amendments in Bill C-29 received royal assent in May 2005 but were not proclaimed into force at that time. In October, the Canadian Minister of Industry announced that the amendments would come into force on February 1, 2006. If Bill C-29 does come into force on that date, patentees or applicants can correct any fee that was incorrectly paid within 12 months from February 1, 2006.

A Possible Model for Aid. In May 2004, Canada amended its Patent Act and Food and Drugs Act to include new sections 21.01 to 21.2 and subsections 30(5), (6) and 37(2), respectively. By doing so, the Jean Chrétien Pledge to Africa Act re-introduced a limited form of compulsory licensing into the Canadian patent regime.

The amendments in the Pledge to Africa Act and the corresponding regulatory amendments, in force as of May 2005, were intended to provide a mechanism whereby a manufacturer could produce patented pharmaceutical products in Canada for export to countries experiencing public health crises without the authorization of the patent holder. Specifically, the regime provides a mechanism whereby a pharmaceutical manufacturer can apply for an “authorization” for making and/or using a patented pharmaceutical product solely for the purpose of exportation to a specified country (generally a “least developed” or “developing” country) or a WTO Member. The authorization granted pursuant to the Pledge to Africa Act is valid for a period of two years, is nonexclusive, is non-transferable, and is renewable for a further two-year period.

As one of the first countries to enact such a detailed legislative regime, Canada has attempted to create a model for balancing the demands of significant public health issues with the rights of patent holders of pharmaceutical products. It remains to be seen whether any drug manufacturers with facilities in Canada will seek an authorization pursuant to this new regime.

Significant Decisions

Markush Claims. In a September decision involving a proceeding under the NOC Regulations, the Federal Court considered the validity of product-by-process claims directed to a polymorph of clarithromycin. In Abbott Laboratories v. Canada (Minister of Health) , the product-by-process claim was directed to a process utilizing a solvent chosen from a Markush group of listed solvents. Typical in chemical cases, claims having a Markush group are directed to a listed group of compounds wherein each compound within the selected group possesses at least one property in common responsible for the desired effect. In this case, some of the listed solvents were found to be incapable of performing the required function. The Court held that if a single member of a recited Markush group is found to lack operability, the entire claim will fall for inutility.

The Federal Court also considered the validity of the product-by-process claim when the polymorph of clarithromycin may have been previously sold. Under older Canadian case law, product-by-process claims were not patentable where the product was anticipated by the prior use or sale of the product, regardless of whether the process was patentable. It was unclear, however, whether this older case law was still applicable under the current Patent Act, where anticipation is determined on the basis of the claimed subject matter being “available to the public.”

In Abbott, supra, Justice von Finckenstein held that this older case law still applies but only where the product is rendered available to the public. In the present case, Abbott’s previously sold clarithromycin product, which may have contained a polymorph of clarithromycin, could render the polymorph available to the public and thus invalidate the product-by-process claim directed to the polymorph, but only if the presence of the polymorph in the clarithromycin product could have been established through analysis.

Sound Prediction. It has been common in pharmaceutical patent cases to rely on the doctrine of “sound prediction” as a basis for establishing the utility of pharmaceutically active compounds. The doctrine of sound prediction was set out by the Supreme Court of Canada in Apotex v. Wellcome Foundation (see also AZT is Finally Immune, Blakes Bulletin on Intellectual Property, March 2003). This doctrine provides that utility need not be based on actual utility if there are the following: (a) a factual basis for the prediction of utility; (b) at the date of the patent application, an articulate and “sound” line of reasoning from which the desired result can be inferred from the factual basis; and (c) a full, clear and exact description of the nature of the invention and the manner in which it can be practised, but it is generally not necessary to provide a theory of why the invention works. Two cases involving angiotensin converting enzyme (ACE) inhibitors decided under the NOC Regulations required the Federal Court to review the doctrine of “sound prediction” and what is meant by the term “at the date of the patent application”.

In the first of three cases involving Aventis, Aventis Pharma Inc. v. Canada (The Minister Of Health) (Aventis I) , Justice Mactavish dealt with the issue of whether the Canadian filing date or the priority date was the “date of the patent application”. To Justice Mactavish, “…while the issue is not free from doubt, it appears that the Wellcome test contemplates that the Canadian filing date be used for the purposes of assessing the soundness of the prediction.” Therefore, the Court assessed the soundness of the prediction based upon the information and expertise available as of the Canadian filing date, nearly one year after the priority date.

In Pfizer Canada Inc. v. Canada (The Minister Of Health) , the second case involving an ACE inhibitor, the Court considered the relevant date between the date of invention of the patent and the priority date. Pfizer had argued that the date of the application should be the date of invention, while Apotex had argued that the date of the application should be the later priority date. Apotex argued that as of the date of the invention, “... the inventors had only ‘conceived’ of a single member of the purported invented class of compounds, had no basis to extrapolate different stereoisomers to various classes of compounds and to bulky compounds, and were unable to predict anti-hypertensive properties of the claimed compounds.” Justice Heneghan concluded that the “date of the application” was the priority date of the patent.

Both the Aventis I and the Pfizer decisions are under appeal.

Patents and Possible Lessening of Competition. As noted in Federal Court of Appeal Confirms Application of Competition Act to IP Rights, Blakes Bulletin on Competition and Intellectual Property, November 2005, the Federal Court of Appeal in Apotex v. Eli Lilly and Company examined the intersection of patent and competition law. The issue before the Court was whether an assignment of a patent was insulated from Canadian Competition Act concerns. More specifically, the Court considered whether, as a matter of law, an assignment of a patent can constitute an agreement or arrangement to lessen competition unduly, contrary to section 45 of the Competition Act, if it results in an increase to the assignee's market power greater than that inherent in the patents assigned. Subsection 45(1) of the Competition Act makes it unlawful for parties to enter into agreements which lessen competition unduly.

Eli Lilly and Company and Eli Lilly Canada Inc. commenced an action against Apotex for infringement of eight patents which relate to processes that can be used in the making of the antibiotic cefaclor, to intermediates that can be formed using those processes, and to a compound used in the processes. Apotex alleged that of the eight patents Lilly claimed were infringed by Apotex, four had been assigned to Lilly by another company prior to commencement of the action and that these assignments constituted an agreement that resulted in “… an undue lessening of competition contrary to section 45 of the Competition Act.”

Lilly argued that older case law effectively shielded an assignment of a patent from any Competition Act considerations. However, the Federal Court of Appeal held that an assignment of a patent may, as a matter of law, unduly lessen competition. This case signals patent owners that patent assignments should be considered within a broader commercial and legal context.

Listing of Patents for Publicly Available Compounds. In the summer of 2005, the Supreme Court of Canada issued a decision in Biolyse Pharma Corporation v. Bristol-Myers Squibb Company et al. In another decision under the NOC Regulations, the Supreme Court examined whether active pharmaceutical ingredients that are not the subject of patent protection per se may be subject to proceedings under the NOC Regulations.

In this case, Bristol-Myers Squibb (BMS) had obtained a number of patents directed to the use and formulation of paclitaxel, which was not patentable per se as it was previously known. Biolyse had a paclitaxel product for which it had received a Notice of Compliance (NOC) to sell in Canada, but did not rely on bioequivalence of its product and that of BMS. BMS challenged the issuance pursuant to the NOC Regulations.

The majority of the Supreme Court overturned the lower court decision quashing the issuance of the NOC. According to Justice Binnie, writing for the majority, an interpretation of the NOC Regulations that confers on BMS a monopoly merely by demonstrating the presence of a public domain medicine like paclitaxel in its product would provide no value to the public. In this case, the NOC Regulations do not apply. The NOC Regulations apply only to submissions for an NOC of generic copies of patented drugs where a manufacturer makes a submission for an NOC for a drug which it purports to copy from an innovator’s product. Since Biolyse did not rely on bioequivalence and was not seeking to market a “copy-cat” drug, its product did not fall within the scope of the NOC Regulations.

Infringement of Use Claims. With respect to many pharmaceutically active compounds, “use” claims provide a means of overcoming or avoiding objections based on methods of medical treatment, which are not patentable in Canada. Two recent decisions of the Federal Court, again involving Aventis Pharma Inc., arrived at different conclusions as to when such claims are infringed.

In Aventis Pharma Inc. v. Canada (The Minister Of Health) (Aventis II) , Justice Simpson considered an application by Aventis under the NOC Regulations to prohibit the Canadian Minster of Health from issuing an NOC for Apotex’s ramipril product. Aventis’ ramipril product was approved for the treatment of heart failure and hypertension, but the latter use was not a patented use as Aventis’ patent only covered the use of ramipril in the treatment of heart failure. Apotex contended that it should be able to supply ramipril for the treatment of hypertension. In Justice Simpson’s view, it was “inevitable” that Apo-Ramipril would be dispensed for the treatment of heart failure. As such, the issuance of the NOC was denied.

Shortly after the decision in Aventis II, Justice von Finckenstein found that there would not be infringement of Aventis’ patent directed to the use of ramipril for the treatment of cardiac and vascular hypertrophy and hyperplasia. In Aventis Pharma Inc. v. Canada (The Minister Of Health) (Aventis III) , the Court noted that while ramipril was prescribed for the treatment of cardiac and vascular hypertrophy and hyperplasia, it was not formally approved for such use. While Apotex conceded that prescribing of its ramipril product for treatment of cardiac and vascular hypertrophy and hyperplasia will occur, Justice von Finckenstein was of the view, citing earlier case law, that mere sale by a generic, without more, of a medicine subject to a use patent is insufficient to constitute infringement under the NOC Regulations. While the Court did not establish what the “more” would be (e.g. inducement, procurement or marketing), it would clearly depend on the facts of each case provided there was a “nexus”. That “[m]ere passive recognition that ‘off-label’ prescription and/or consumption will occur does not amount to ‘something more’”. As such, the application for prohibiting the issuance of Apotex’s NOC could not proceed.

As with Aventis I, both Aventis II and Aventis III are under appeal to the Federal Court of Appeal and hopefully, the Court of Appeal will reconcile these decisions as well as the law in this area.

Extraterritoriality

One of the most significant patent stories of the year did not, strictly speaking, involve Canadian patent law, but could have an impact on Canadians doing business in Canada and the United States. Many will be familiar with the ongoing matters involving Research In Motion Limited, the maker of BLACKBERRY wireless handheld devices, and its patent battles against NTP, Inc. south of the 49th parallel. That case illustrates that Canadian companies must be wary of the possible extraterritorial reach of U.S. patents and their claims into Canada.

Conclusion

As the impact of these amendments and cases will be felt well after 2005, Blakes will continue to monitor these events as they unfold.

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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