Canada as a patent outlier

Canada’s reputation as unfriendly to innovators may be changing.

Canada as a  patent outlier

Canada’s reputation as unfriendly to innovators may be changing

Canada has been considered an outlier by many in terms of its so-called promise doctrine, with one study, released last fall, attributing lowered levels of R&D investment in Canada’s innovation ecosystem to our country’s unique judicial “promise doctrine.” 

But the Supreme Court of Canada found this doctrine “unsound” in its decision in AstraZeneca Canada Inc. et al. v. Apotex Inc. et al., released in June, which IP lawyers say brings Canada more in line with other industrialized nations. That decision — as well as the record-breaking award in Nova Chemicals Corporation v. Dow Chemical Company, et al. by the Federal Court in February, and even the Supreme Court’s June judgement in Google Inc. v. Equustek Solutions Inc., which indirectly affirmed the respondent’s intellectual property rights by upholding a worldwide interlocutory injunction against Google — may only strengthen Canada’s position as a favourable jurisdiction for patent applications.

The SCC decision in AstraZeneca “reaffirms that Canada has a strong patent system, and as a jurisdiction it can be attractive in terms of IP rights: both law and remedies,” says Steven Garland, an intellectual property litigator and a patent and trademark agent with Smart & Biggar/Fetherstonhaugh in Ottawa. Before the Supreme Court’s judgment in the case, which effectively struck down the promise doctrine, “many people thought Canada was an outlier” in its unique “promise doctrine.”

The promise doctrine was developed through the Federal Courts’ jurisprudence; under it, a judge reviewed a patent as a whole to identify any “promises” made in it, then assessed whether those promises had been met in order to satisfy the utility requirement of the patent under the Patent Act. If any single “promise” was determined by the judge not to have been met, the entire patent could be invalidated.

Garland says the Supreme Court’s decision was valuable in providing guidance on the relevance of the promise doctrine and “brought Canada back in line [with other jurisdictions] in respect to the utility requirement of patents.”

With NAFTA negotiations having begun in August, the SCC decision in AstraZeneca is particularly important, says Bradley White, who chairs the National Intellectual Property Department for Osler Hoskin & Harcourt LLP from the firm’s Ottawa office. “The promise doctrine was seen as a thorn, an issue that would come up when NAFTA was renegotiated,” White says. “This Supreme Court decision was watched with great interest both in and outside of Canada. It’s a very significant decision.”

Indeed, Canada has been on the United States trade department’s “watch list” for a dozen or so years, says Tomas Karger, a registered patent agent and associate of Sim & McBurney LLP in Toronto. In the 2017 report of the Office of the U.S. Trade Representative, Karger notes, Canada was named as a country placing roadblocks in front of innovators or brand pharmaceutical developers.

“U.S. innovators face challenges including restrictive patentability criteria, that undermine opportunities for export growth in countries such as Argentina, Canada, India, and Indonesia,” the USTR report stated.

“In addition, the United States continues to have serious concerns about the lack of clarity in, and the impact of, utility requirements for patents imposed by Canadian courts. In these cases, courts have invalidated valuable patents held by U.S. pharmaceutical companies on utility grounds by interpreting the ‘promise’ of the patent and finding that insufficient information has been provided in the application to substantiate that promise,” the report said.

“The United States understands that the Supreme Court of Canada has the opportunity to clarify this doctrine in the near future. The United States urges Canada to engage meaningfully with affected stakeholders and the United States on patent utility issues.”

Karger believes the report was calling out an earlier ruling in AstraZeneca, which the SCC overturned with its decision in June, as affecting confidence or interest in Canada as a patent jurisdiction. “The Supreme Court seems to have tried to appease some of those concerns,” he says, adding that other recent high-court decisions, including Dow v. Nova and Google v. Equustek, have further strengthened intellectual property rights. The decisions are in “different areas of the law, but they’re consistent in that they strengthen IP rights for patent holders.”

The promise doctrine “created all kinds of uncertainty with respect to the validity of patents,” says Christopher Van Barr, partner and patent agent with Gowling WLG in Ottawa, whose practice focuses on life sciences and manufacturing and who acts in many parallel proceedings. In the pharmaceutical industry, he notes, certainty is especially important when one patent may cover the formulation of a whole class of drugs, for example. “In eliminating the promise doctrine, you have more certainty,” says Van Barr. “At its core, that [SCC] decision . . . brings us back to looking at the claims, the invention and its validity” rather than at multi-page documents that may hold one or more “promises.”

“What’s a promise? It depends on who’s asking the question and who’s answering it,” he says.

Osler’s White, whose firm represents generic drug manufacturers, says he believes Canada’s IP law was already robust before the SCC decision in AstraZeneca, and that given the size of the pharmaceutical industry around the world, “they weren’t going to not file for patent applications in Canada. And so I’m not sure the promise doctrine was going to stop pharmas from filing . . . in Canada,” although there was “no doubt that patents would be held to a dramatically different standard in Canada,” he says.

“Not having the promise doctrine . . . is one less mechanism” available in challenging the patent under 27(3) of the Patent Act, which sets out the required specifications of an invention.

Van Barr sees AstraZeneca as a balanced decision that swings “the pendulum back to the middle . . . to a neutral position.”

In April, the Federal Court made the largest patent infringement award in Canadian history when it awarded Dow Chemical Company $645 million from Nova Chemicals Corp., which was found to have infringed Dow’s Canadian patent for polyethylene compositions used in packaging and heavy-duty wrapping. Justice Simon Fothergill ordered Nova to disgorge profits it made during the infringement. 

Dow’s an example of where the remedy here was the disgorgement of the infringing profits by Nova,” says Garland, who led the team representing Dow before the Federal Court.

“That’s not a remedy, in my understanding, that is generally available in other jurisdictions, such as the U.S.” In Canada, a successful plaintiff, at a judge’s discretion, can elect between recovering its own damages or recovering infringing profits made by the defendant. “Under the right circumstances, that could make Canada an attractive jurisdiction,” he says. “I think [the decision is] simply going to highlight the point that Canada can be an attractive jurisdiction in which to pursue one’s patent rights, in terms of the kinds of remedies available.”

With the utility requirement clarified by the Supreme Court, Gowlings’ Van Barr sees “obviousness” and how the “inventiveness” of an invention should be measured as a future battleground. For a patent to be valid in Canada, the invention claimed must be new and inventive; if the claimed invention is not inventive, it is deemed to be “obvious” and, therefore, not patentable.

“The law was straightforward for a long time in Canada,” says Van Barr, “but it changed . . . with [the Supreme Court case Apotex Inc. v Sanofi-Synthelabo Canada Inc], which introduced a new test for obviousness, and “since that time the courts have been interpreting and reinterpreting what that test means.”

Noting April’s Federal Court of Appeal in Bristol-Myers Squibb Canada Co. v. Teva Canada Limited, Van Barr says the “obvious to try” test, which can be used to extend obviousness and invalidate a patent, “is a battleground right now.” The test “is applied in technologies subject to lots of experimentation,” including in pharmaceutical cases, he says.

In Bristol-Myers Squibb, the Federal Court of Appeal upheld a Federal Court decision in a case involving a patent for the drug Atazanavir, used to treat HIV and AIDS. In the earlier decision, Federal Court Justice Anne Mactavish found Teva’s allegation that Bristol-Myers Squibb’s patent was invalid for obviousness was justified, notably regarding the improved bioavailability of the bisulfate salts used in the drug. The Federal Court of Appeal — which found that the extent, nature and amount of effort to get Type-I atazanavir bisulfate demonstrated that its discovery was obvious — provided clarity and guidance on the meaning of “inventive concept” and the use of the “obvious to try” test in the obviousness analysis, Osler’s White co-wrote in a blog post on the decision.

“Obviousness has always been a battleground, but [litigation] will shift more toward to that,” Van Barr predicts.

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