Canada: Canadian Patent Litigation: Five Things To Watch In 2018

Last Updated: February 16 2018
Article by SnIP/ITs Blog, James S.S. Holtom, Sanjaya Mendis and David Tait

Most Read Contributor in Canada, September 2018

2017 was a significant year for Canadian patent law — one marked by the Supreme Court abolishing the so-called 'Promise Doctrine' of utility, as well as several other significant changes. Here's a look at five things to watch for in patent litigation in the coming year.

1. Promise Doctrine Abolished

On June 30, 2017, the Supreme Court of Canada, released a landmark patent decision AstraZeneca Canada Inc. v. Apotex Inc., 2017 SCC 36, abolishing Canada's so-called 'Promise Doctrine' (our commentary here). Under the Promise Doctrine, patents could be invalidated if various heightened utilities construed from the patent were not demonstrated or soundly predicted by the Canadian filing date. The new two-part test for assessing utility in Canada requires: (i) identifying the subject-matter of the invention as claimed in the patent, and (ii) determining whether that subject-matter is useful — is it capable of a practical purpose (i.e. an actual result) on a mere scintilla standard?

The Federal Court of Appeal applied the Supreme Court's new utility test for the first time in Bristol-Myers Squibb Canada Co. v. Apotex Inc., 2017 FCA 190. The Court ruled that BMS's discovery of a compound that inhibited a biological target implicated in various diseases was a useful discovery sufficient to meet the new utility requirements, even though Apotex argued that it was insufficient that the effect had only been demonstrated by in vitro testing as of the relevant date, making it no more than a mere laboratory curiosity.

Watch out for litigants continuing to argue over the correct application of the AstraZeneca decision in 2018.

2. Obviousness Test Unsettled

In two cases in 2017, the Federal Court of Appeal questioned the usual application of established obviousness law. In the first decision, Bristol-Myers Squibb Canada Co. v. Teva Canada Ltd., 2017 FCA 76, the Federal Court of Appeal suggested a diminished importance of determining the "inventive concept" as a step in the obviousness analysis. Characterizing it as an occasionally "unnecessary satellite debate", the court held that the difference(s) between what was claimed and the prior art was what matters.

In the second case, Ciba Specialty Chemicals Water Treatments Limited's v. SNF Inc., 2017 FCA 225, the Federal Court of Appeal appears to have doubled down (our commentary here). The court held that, without an adequate definition, the search for the inventive concept had resulted in confusion and that it was more useful to construe the claim instead. The panel also split on the narrow but lingering issue of whether the "reasonably diligent search" test remains good law when it comes to the public availability of prior art. Under that test, only prior art that would be found by the skilled person conducting a reasonably diligent search may be cited in an obviousness attack.

The continued relevance of the inventive concept and the reasonably diligent search test will be key issues to watch in 2018.

3. Development of 'Non-Infringing Alternatives' in Canada

Fairly recently, in Apotex Inc. v. Merck & Co., Inc., 2015 FCA 171, the Federal Court of Appeal recognized for the first time in Canadian law that 'non-infringing alternatives' (NIAs) could be taken into consideration to potentially reduce a plaintiff's damages. If the infringer had an NIA, it could argue that it could and would have damaged the plaintiff legally, without infringing the patent. If proved, the only available remedy was a reasonable royalty.

In Apotex Inc. v. ADIR, 2017 FCA 23, the Federal Court of Appeal affirmed that NIAs are equally applicable in both the compensatory damages and accounting of profits contexts (our commentary here).

In August 2016, the Federal Court of Appeal heard an appeal from a decision of the Federal Court rejecting the application of the NIA outright, Eli Lilly and Company v. Apotex Inc., 2014 FC 1254. The Federal Court of Appeal's decision remains under reserve and is expected to be released early in 2018. What additional guidance the decision contains will be seen in 2018.

4. Law of Sufficiency Remains Unchanged

Following the Supreme Court's decision in Teva Canada Ltd. v. Pfizer Canada Inc., 2012 SCC 60, some litigants have questioned whether the Supreme Court changed the law of sufficiency of a patent's disclosure. In Teva Canada Limited v. Leo Pharma Inc., 2017 FCA 50, the Federal Court of Appeal held that the answer to that question was 'no.'

Following AstraZeneca Canada Inc. v. Apotex Inc., 2017 SCC 36, described in Issue (1) above, some litigants have attempted to transfer promise-type arguments to other validity doctrines, including insufficiency. In Pfizer Canada Inc. v. Apotex Inc., 2017 FC 774, the Federal Court rejected this argument, holding that the Supreme Court did not change the law of sufficiency in the AstraZeneca decision. This decision has been appealed to the Federal Court of Appeal.

Whether these holdings remain good law and the law of sufficiency remains unchanged will be a key issue for 2018.

5. Enhanced Costs for Unmeritorious Claim in NPE Litigation

In 2017, the Federal Court rendered its first ever judgment in a patent infringement action commenced by a non-practicing entity (NPE) in Mediatube Corp. et al. v. Bell Canada, 2017 FC 6 (our commentary here). The Federal Court dismissed the Plaintiffs' suit seeking in excess of $350 million damages as well as significant punitive damages. In awarding Bell its costs elevated by 50%, the Court reprimanded the Plaintiffs for their conduct in commencing the action "without a clear theory of infringement" and bringing a case to trial that required "contortions of the claims [...] to find infringement". The Court noted that "the case for non-infringement is so compelling that I am not prepared to accept that the plaintiffs had a reasonable belief that they had a good arguable case."

With the proliferation of NPE litigation in the U.S., a key issue to watch for in 2018 will be whether Canada continues to see NPE litigation north of the border.

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