Pharma innovators in Canada: is utility standard uncertainty worth the risk?
The granting of Canadian patents is governed by the federal Patent Act and Patent Rules, and various regulations under them. They legislate that a patent may be obtained for an invention if it is new, non-obvious, and useful (the utility requirement). To meet the utility requirement, an invention must be capable of industrial application, meaning that the invention can be made and/or used in an industry of some kind. Utility is not a Canada-specific legal requirement. Rather, it is found in patent systems around the world and applies to all patented inventions, pharmaceutical or otherwise.
However, Canadian courts have interpreted utility requirements of the Patent Act in a way that differs from the way it is interpreted in other countries and which impacts the pharmaceutical industry specifically. If, in a given court case, the demonstration or evidence of anticipated utility falls short of fulfilling the ‘promise’ as it is deemed to have been contained in the patent, it will be invalidated for lack of utility even if the invention is useful, either to some other degree than promised or for some other purpose (the so-called promise doctrine).
In effect, the promise doctrine presents three requirements:
1) A judge subjectively construes the ‘promise of the patent’ from the patent specification;
2) A heightened evidentiary standard for proof of utility is applied, which requires that the promised utility either be ‘demonstrated’ by the patentee or be based on a ‘sound prediction’ of utility from the date of filing; and
3) In relation to ‘sound prediction’, a heightened disclosure requirement mandates that evidence establishing utility must have been disclosed in the original patent application.
The invalidation of an increasing number of pharmaceutical patents on the grounds of heightened utility requirements has created an atmosphere of uncertainty and distrust among pharmaceutical companies in Canada and beyond. In several cases, generic drug manufacturers have tried to invalidate patents for lack of utility, even though the drug is clearly useful for the treatment of a disease and is being sold to Canadians for this purpose. This has resulted in the early approval of several generic drug products in Canada because the drugs in question were useful for purposes other than those specified in the patent.
Given that pharmaceutical patents have been disproportionately affected by the Canadian utility standard, it has been argued that this standard inappropriately discriminates against pharmaceuticals as a field of technology.
Some key causes of uncertainty generated by the promise doctrine are that it is prone to subjective judicial interpretations, is retroactively applied to issued patents, is characterised by loosely defined regulatory standards, is inconsistent with the practices of other countries, and is inconsistent with Canada’s international treaty obligations.
Interpretation
The manner in which Canadian judges have applied the promise doctrine has been criticised as arbitrary and subjective. The Federal Court of Appeal in Eli Lilly Canada v Novopharm in 2010 described the utility requirement in Canadian law as: “Where the specification does not promise a specific result, no particular level of utility is required; a ‘mere scintilla’ of utility will suffice. However, where the specification sets out an explicit ‘promise’, utility will be measured against that promise. The question is whether the invention does what the patent promises it will do.”
However, a few cases, such as Sanofi-Aventis v Apotex in 2013, where the Federal Court of Appeal reversed a finding of no utility regarding the Plavix (clopidogrel) patent, suggest a more moderate interpretation by the courts where a promise of utility should not be assumed unless the inventor makes an explicit promise of a specific result. Because the court in Sanofi-Aventis did not overturn several previous decisions by the Federal Court of Appeal that found and enforced implicit promises, it is uncertain how clear a statement must be in order for the skilled reader to find an explicit promise. The lasting effect of the current debate is that new patent applicants are uncertain about how to draft a patent in order to meet the utility standard.
This new test for utility has been incorporated into the Canadian Intellectual Property Office’s (CIPO) “Manual of Patent Office Practice”, indicating that CIPO’s position that all promises appearing in a patent must be fulfilled is an adapted one. Moreover, courts are applying this new standard of utility retroactively to patents that were drafted and approved many years before the change in the courts’ interpretation.
CIPO’s mission statement is to “contribute to Canada's innovation and economic success” by, among other things, “providing greater certainty in the marketplace through high-quality and timely IP rights”. However, the manual offers very little practical guidance for patent drafters who promise, for instance, that a drug will effectively treat an illness with continued usage over time. The manual makes no mention of how one might demonstrate a mere scintilla of utility, and innovators are not allowed to introduce evidence derived from testing in support of utility after the initial patent filing. The problem remains that applicants cannot reliably predict what information will suffice to establish utility in Canada.
“Eli Lilly is arguing that Canada’s utility requirement denies protection to inventions that otherwise meet the patentability standards set out in NAFTA and other international treaties.”
It remains unclear how much evidence is required to meet the Canadian utility standard, since the standard is determined on a case-by-case basis according to what the courts determine the patent has ‘promised’. Critics charge that the utility doctrine puts many patents at risk because any language within the application that professes a benefit from the invention could be interpreted or implied by the courts as a promise. In other words, the doctrine establishes an impractical evidentiary burden since it is impossible to predict at the date of filing how, specifically, the potential will be met.
This heightened standard of utility is particularly problematic for pharmaceutical drug patents because most clinical trial studies on drug efficacy are conducted after the patent application is filed. Innovators cannot undertake the tremendous expense and experimental risks associated with performing human clinical trials without some reasonable assurance of patent protection and—by extension—profitable market exclusivity.
Caught in a ‘catch 22’, the applicant is faced with two substantially risky options. On the one hand, the applicant may make its promise at the time of filing before conducting long-term clinical studies in humans. On the other, it may first conduct longer term clinical studies before the filing of the patent application in an attempt to comply with the promise doctrine’s heightened utility standard, thereby risking invalidity on the basis of the two other patentability requirements (obviousness and lack of novelty), since such studies are published and in the public domain once concluded. Both options present uncertainties that may be hard to reconcile by risk-averse innovators and investors operating within the Canadian pharmaceutical marketplace.
Adding to the level of confusion and uncertainty for global innovators trying to enter the Canadian marketplace, the Canadian promise doctrine is not found in legislation in other jurisdictions such as the US, EU or other major trading partners. In fact, patents that have been upheld in other nations are being attacked and invalidated in Canada. This deviation is negative for pharmaceutical companies, which often seek patent protection in multiple jurisdictions in attempts to offset the extremely high costs associated with developing new drugs.
A 2011 analysis of CIPO data by the IPPractice blog revealed that 87% of patent applications either published in that year or that had entered national phase entry in Canada originated from a foreign country. By deviating from the practices of its major trading partners, Canada’s willingness to act as a national outlier in a truly international patent system is problematic.
Not only has the interpretation of the Patent Act’s utility requirements by Canadian courts put Canada at odds with other jurisdictions, many argue it has done so in a manner inconsistent with its long-standing international treaty obligations. The doctrine calls into question Canada’s commitments under treaties such as the North American Free Trade Agreement (NAFTA) and the TRIPS Agreement—specifically, to “ensure a predictable commercial framework for business planning and investment” and to “ensure that measures and procedures to enforce intellectual property rights do not themselves become barriers to legitimate trade” (according to the treaties’ respective preambles).
The purposes and benefits of minimum standards as embodied within applicable treaties are undermined by the dichotomy in approaches to utility in Canada versus jurisdictions such as the US and EU.
Obligations
Bringing this line of thinking to the world’s stage, Eli Lilly, a US-based corporation, filed a $500 million lawsuit against the Canadian government under NAFTA’s chapter 11. The suit was launched following the Supreme Court of Canada’s decision to deny Eli Lilly’s leave to appeal against decisions invalidating its patents protecting the drugs Strattera (atomoxetine) and Zyprexa (olanzapine) because of no utility.
Eli Lilly claims that Canada violated its obligations to the company as a foreign investor by taking away its patent rights on these grounds. Eli Lilly believes that Canada’s utility requirement denies protection to inventions that otherwise meet the patentability standards set out in NAFTA and other international treaties.
Innovators wishing to patent innovations in Canada should be aware of the uncertainty generated by the status quo while monitoring potential avenues for change. Given that this issue has been created by case law, the conventional remedy is for a higher court to fix the problem. At this time, however, it is unclear when another case will reach the Supreme Court of Canada, although AstraZeneca is awaiting response to its application for leave to appeal against a patent utility case (July 2015) that invalidated its drug Nexium (esomeprazole).
Another possible solution would be to amend the Patent Act to overturn the harmful case law that has emerged from the federal courts on this issue. However, there have been no initiatives to make changes to the Patent Act itself. Although IP has been addressed as a trade barrier in Canada’s recent trade agreements and negotiations, utility standards have not been addressed towards enabling Canada to compete on a more even playing field with international pharmaceutical firms.
Failing a formalised step in one direction or another, it is advisable to carefully survey jurisprudential developments that emerge from the federal courts with the advice of Canadian IP counsel. Although by no means decisive, the approach taken by judges at this level may trend towards policy development. In terms of international case law, the Eli Lilly chapter 11 case will probably be heard some time in May 2016, with a ruling not expected before 2017.
For the time being, unpredictability in the enforcement of patents in Canada as compared to other nations will remain a significant concern for businesses. The interpretative character of patent rights has left innovators to question whether the Canadian patent system is striking the necessary balance between technological innovation and market sustainability. Until greater certainty is achieved, pharmaceutical innovators in Canada should ask whether the uncertainty of heightened utility standards is worth the risk.
Declan Hamill is chief of staff and vice president of legal affairs at Innovative Medicines Canada, the association for Canada’s innovative pharmaceutical industry. He can be contacted at: dhamill@imc-mnc.ca
Megan Kendall is a student-at-law with Innovative Medicines Canada. She can be contacted at: mkendall@imc-mnc.ca
