Law Times

Law Times • June 10, 2013 Page 5 NEWS Canada's utility requirement for patents targeted by U.S. But SCC refusal to hear controversial IP case means schism likely to continue BY JULIUS MELNITZER For Law Times T he Supreme Court of Canada's recent refusal to hear a controversial intellectual property case means Canada may continue to shoulder criticism from a U.S. intellectual property priority watch list unless the federal government takes remedial legislative or regulatory action. One of the primary reasons for Canada's inclusion on the watch list, according to the U.S. trade representative's annual intellectual property report for 2013, is "the impact of recently adopted heightened utility requirements" that it claims don't conform with NAFTA or the Agreement on Trade Related Aspects of Intellectual Property Rights. "The listing comes at a time when challenges to Canada's new utility requirements have been raised in a NAFTA Chapter 11 proceeding initiated by Eli Lilly against the government of Canada [over the company's attention deficit/hyperactivity disorder drug Strattera] and in various scholarly publications," says Patrick Kierans of the Toronto office of Norton Rose Fulbright Canada LLP. On May 13, 2013, the Supreme Court held a rare oral hearing on the motion for leave to appeal in Eli Lilly Canada Inc. v. Novopharm Ltd. The case under consideration was a 2011 Federal Court decision invalidating Eli Lilly's Canadian patent for the schizophrenia drug Zyprexa because it didn't meet "utility" requirements. Arguably, the unusual decision to conduct an oral hearing boded well for the leave applications. "The court hasn't offered an oral hearing on a leave application since the '80s," says Andrew Shaughnessy of Torys LLP's Toronto office. "My sense was that if they saw the necessity for an oral hearing, they were troubled by something in the law as it stood." But three days later, the court dismissed the application, effectively giving tacit approval to some 17 recent rulings by Canadian courts invalidating drug patents on the utility grounds. The utility controversy stems from the Patent Act's requirement that an invention must be "useful" to be patentable. "While usefulness is not defined in the Patent Act, courts held throughout the 20th century that an invention only needed to have a scintilla of utility to be patentable unless something more was promised," says Kierans. "This all changed in 2002 in the seminal decision of Apotex Inc. v. Wellcome Foundation." Historically, the patent office had examined utility as of the date the patent was challenged. But in Wellcome, the Supreme Court held that patent applicants must either demonstrate or "soundly predict" the utility of an invention as of the filing date. This effectively required applicants to provide evidence of utility in the patent application. "This disclosure requirement is not found in the Patent Act," says Kierans. "And that makes sense because pharmaceutical patent applications are often filed long before the clinical trial process is over." Consequently, judges have been assessing utility against the "promise of the patent," a subjective construct that the courts determine by reading the patent as a whole as opposed to just the patent claims. "Determining the promise has become a very contentious and unpredictable issue in Canadian patent litigation and a fruitful ground for attacking pharmaceutical patents," says Kierans. The upshot is that Canadian judges have struck down patents on the basis that the applicant hadn't shown utility in the patent application even though the drugs have in fact proved useful by the time the courts dealt with the issue. Generic drug companies, of course, have welcomed these developments because they allow them to launch generic versions of the drugs in Canada well before the patent would otherwise have expired. From an international perspective, the difficulty is that Canada is the only developed nation that imposes a utility requirement. Indeed, NAFTA and the Agreement on Trade Related Aspects of Intellectual Property Rights both require signatory states to grant 'While usefulness is not defined in the Patent Act, courts held throughout the 20th century that an invention only needed to have a scintilla of utility to be patentable unless something more was promised,' says Patrick Kierans. patents for inventions as long as they meet the requirements of being new, non-obvious in the sense that they result from an inventive step, and useful in the sense that they're capable of commercial or industrial application. Shaughnessy says the Supreme Court's decision related to Zyprexa was disappointing but notes it didn't surprise him. "Ultimately, domestic courts' views have been that they will construe our law as it stands, so arguments based on international treaty obligations have not succeeded," he says. But Shaughnessy is hopeful the federal government will remedy the situation. "Patent Act amendments come very slowly and they're frequently very politically charged," he says. "On the other hand, the federal government has in fact amended the Patent Act in the past in response to international challenges." LT ONTARIO LAWYER'S PHONE BOOK 2013 YOUR MOST COMPLETE DIRECTORY OF ONTARIO LAWYERS, LAW FIRMS, JUDGES AND COURTS With more than 1,400 pages of essential legal references, Ontario Lawyer's Phone Book is your best connection to legal services in Ontario. Subscribers can depend on the credibility, accuracy and currency of this directory year after year. 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