Intellectual Property Litigation: 2017 Year In Review

There were a number of important updates to the practice of intellectual property litigation in 2017. Most notably, the Patent Act and the Patented Medicines (Notice of Compliance) Regulations were significantly amended to comply with Canada's obligations under the Canada-European Union Comprehensive Economic and Trade Agreement (CETA). The amendments resulted in elimination of the longstanding summary application procedure under the PM(NOC) Regulations in favour of full trials, and introduced certificates of supplementary protection to provide extended protection for patented medicines.

In this article, we summarize our top picks of legal developments affecting intellectual property litigation before the Federal Court of Canada in 2017.

1. Updated PM(NOC) Regulations

   In 2016 Canada signed the Canada-European Union Comprehensive Economic and Trade Agreement. This led to significant amendments to the Patent Act1 and the PM(NOC) Regulations,2 which came into force in 2017. The changes are many and complex, but two stand out as particularly significant:

   The Patent Act was amended to allow for the Minister of Health to issue Certificates of Supplementary Protection (CSP)3 for any "new Act" patent (any patent pertaining to a medicinal ingredient in a drug with a filing date on or after October 1, 1989). A CSP to extend the term of a monopoly over drugs covered by a patent4 for a period of up to two years.5 The summary application procedure under the PM(NOC) Regulations to prohibit the Minister of Health from issuing marketing authorization to a second person (i.e. a generic) was replaced with a right of the first person (i.e. innovator/patentee) to commence a full action for a declaration of infringement of a patent or CSP listed on the register.6 The second person may counterclaim for a declaration that the patent or CSP is invalid.7 If a first person brings an action for infringement of a listed patent or CSP within 45 days of being served with a Notice of Allegation, then the Minister of Health is prohibited from issuing a Notice of Compliance until two years after the action is commenced.8 This deadline requires the parties to proceed diligently in order for the action to be heard promptly.

   While the new procedure is more complex (being a full trial with discovery rather than a summary application based on affidavit evidence), it will eliminate the multiplicity of proceedings that plagued the industry under the old Regulations. Because the former procedure was summary in nature, determinations of infringement and validity were not final. As a result, the same parties often re-litigated the same patents as full infringement and validity trials regardless of the outcome of a PM(NOC) proceeding. Under the amended Regulations, the determination of patent infringement and validity issues are final, subject to appeal.

   Also, under the former Regulations, the right of an innovator to appeal was often frustrated for mootness. If a prohibition application was dismissed, and the Minister of Health issued a Notice of Compliance to a generic, the Federal Court of Appeal would dismiss the innovator's appeal as being moot (the prohibition order being sought could no longer be granted). The Court would also decline to exercise its discretion to hear the appeal nonetheless, because the proceeding did not finally determine the issues of infringement and validity, and it did not prejudice the innovator from bringing an action for patent infringement (thus leading to a multiplicity of proceedings). Under the amended Regulations, both parties will have equal rights of appeal.

2. Inducement to Induce Infringement

   In Elbit v Selex,9 Prothonotary Tabib rejected an argument that inducement to induce is not a recognizable cause of action in Canadian patent law. The plaintiff alleged that Selex had induced (or would imminently induce) its customer, General Dynamics—the prime contractor upgrading Canada's fleet of CP140 Aurora aircraft—to induce the Government of Canada into infringing Elbit's patent by using infringing equipment installed on the aircraft by General Dynamics.

   The Court reasoned that, since one who induces infringement is itself an infringer, that person may then be considered a direct infringer for the purposes of applying the test set out by the Federal Court of Appeal in Weatherford v Corlac.10 On a motion to strike, this was sufficient to maintain the pleading. Justice Martineau upheld the decision on appeal.11 The Court also refused to strike a claim for damages relating to sales of the impugned system outside of Canada, on the basis of an allegation that the alleged infringement would give the defendant leverage to make sales outside of Canada that it would not have made but for the infringement in Canada.

3. Interlocutory Injunctions and Irreparable Harm: Must Damages be Impossible to Quantify, or is Very Difficult Enough?

   The tripartite test for interlocutory injunctions formulated by the Supreme Court in RJR – MacDonald12 continues to be an extremely high threshold in patent cases, with the majority of decisions turning on whether the applicant has established with clear and non-speculative evidence that it will, in the absence of an injunction, suffer irreparable harm.

   In Tearlab v I-Med Pharma,13 the Federal Court of Appeal upheld a Federal Court decision refusing to grant an interlocutory injunction in a patent infringement case. The injunction was refused primarily because the patentee was unable to establish that it would suffer irreparable harm without the injunction. On appeal, the patentee focussed on its alleged vulnerability to unquantifiable damages to demonstrate irreparable harm. The court rejected this argument because the motions judge had not made a palpable and overriding error when concluding that damages could reasonably be quantified after trial.

   Practically, following the Federal Court of Appeal's decision in Tearlab, it remains nearly impossible to obtain an interlocutory injunction for patent infringement in Canada because the harms flowing from infringement are regarded as being economic in nature. As such, they can be compensated for by way of damages, and are not "irreparable".

   Tearlab is an interesting contrast to Sleep Country v Sears,14 which is...