Pankhuri Malik is an IPilogue Writer, IP Innovation Clinic Fellow, and an LLM Candidate at Osgoode Hall Law School.

On May 31, 2022, the Federal Court of Canada in favour of the plaintiffs, Janssen and Actelion Pharmaceuticals ("Janssen”) in their action against Sandoz. The Court held that Janssen’s combination therapy patent is valid. is often used to treat ailments and medical conditions where treatment through single-agent therapy has proven to be challenging.

Background

The present case concerns the validity of claims 21 to 31 of Janssen’s Canadian combination therapy patent for treatment of diseases involving , including pulmonary arterial hypertension (PAH). The patent seeks to treat the ailments through a combination of Macitentan (sold under the brand name Opsumit) and phosphodiesterase type-5 inhibitor (PDE5-1).

Sandoz sought permission from Health Canada to market generic medicine containing 10mg of Macitentan as the active pharmaceutical ingredient (API) for use alone, or in combination with PDE5-Is. Janssen filed an action before the Federal Court claiming that Sandoz’s generic medicine will infringe upon claims 21 to 31 of the plaintiffs’ patent.

Defences

Sandoz conceded that its proposed medicine does infringe the alleged claims, but defended against Janssen’s claims by raising four different grounds of invalidity. However, the Court rejected Sandoz’s arguments that the combination therapy invention was obvious, lacked a sound prediction of utility, and that the patent was overbroad, and the specifications were insufficient.

1. Obviousness

The Court in held that whether an invention is “obvious” depends on if the skilled person (without any inventiveness), in view of the state of the art and the common general knowledge on the date of publication, would have directly or without difficulty come to the same conclusion as the patent. Plainly, the test can be understood as:

1. Identify the person of skill in the art (“POSITA”), and their common general knowledge;
2. Identify the inventive concept;
3. Identify the difference between the inventive concept and the “state of the art”; and
4. Determine if the difference is obvious or if it requires inventiveness.

The Federal Court followed the test down to the T and held that the available evidence and prior art do not indicate that the POSITA would have considered the combination of Macitentan with PDE5-I to show effectiveness in treatment of ailments involving vasoconstriction, where monotherapies have failed.

Since Sandoz raised the defence of invalidity, Sandoz had the onus to establish obviousness, which it was unable to do.

2. Utility

The requirements to establish a sound prediction of utility were set out in the case of as:

1. A factual basis for prediction;
2. An articulable and sound line of reasoning; and
3. Proper disclosure.

The Court, having considered the POSITA’s common general knowledge and the test results provided in the patent, concluded that the plaintiffs met the requirements of sound prediction of utility.

3. Overbreadth

Here, Sandoz recycled its argument of utility in claiming that the patent does not disclose a sound line of reasoning and claims overtly broad protections. However, the Court relied on its own analysis under Utility and concluded that a sound line of reasoning is present, thereby invalidating the overbreadth argument.

4. Sufficiency

A patent specification is required to provide sufficient disclosures to enable the POSITA to use the invention. Sandoz claimed that the specification of the patent does not enable the POSITA to put the invention to use. The Court reasoned that Sandoz’s “sufficiency” argument contradicted its “obviousness argument.” Further, Sandoz failed to explain the lacunae in the specification that needed filling for the disclosure to be sufficient.

The Judgment

Unable to find merit in Sandoz’s arguments, the Court declared that Sandoz would infringe the asserted claims if granted permission to market its generic medicine in Canada. As of July 20, 2022 Sandoz has filed an against Federal Court’s judgment.  

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This past week the court resolved , which involved a patent related to a “multifunctional card system”. (‘608 Patent) is held by Alexsam’s Robert Doff who alleged that IDT was infringing on claims related to the technology that allows for the activation of phone cards and pre-paid gift cards. This case is an appeal from the District Court judgment that determined claims 57 and 58 of this patent were infringed and that the patent itself was not invalid. As a result, Alexsam was awarded $9,065,476 in reasonable royalties.

The critical issues in this case related to the cards being encoded with a unique Bank Information Number (BIN) and activating them using a standard, unmodified point-of-sale (POS) device. This litigation surrounded the use of four systems: (1) the “Walgreens system” in which the “card activation data traveled from the POS terminal to an intermediate host computer owned by Walgreens and then to a dedicated line to IDT’s host computer”; (2) the “EWI system”, which was substantially similar to the "Walgreens system" except that it used an intermediate host computer (EWI) rather than a retailer owned host; (3) the “SafeNet system”, which sends the activation data to a bank computer rather than an intermediate and then to IDT using a network owned by MasterCard; and lastly,  (4) “Miscellaneous systems”, which was a group of systems that used different networks to activate cards (eg. the Sears, InComm, and PaySpot networks).

The “Walgreen” and “EWI system” were discussed together in this judgment. It was argued by IDT that the previous denial of the motion for judgment of non-infringement by the district court was in error as Alexsam had failed to present substantial evidence that both the Walgreens and EWI systems were unmodified, as required in the patent claim. Both of Alexsam’s witnesses stated that the POS terminals did not require modification. Neither stated, however, that no modifications or alterations were actually made. As a result, it was concluded that Alexsam had not presented substantial evidence which showed that the terminals in the systems were not altered for their use in the card system. The decision of the district court was then reversed.

The finding of infringement of the ‘608 Patent by the “Miscellaneous systems”  was considered by the district court to be a sanction  for discovery misconduct, namely IDT’s failure to disclose that the card code numbers contained BINs. This type of sanction is accepted where it is “just and fair” and the evidence has a “substantial relationship” to the facts that are seeking to be disclosed by the discovery. In this case, it was considered “just and fair” as IDT was given multiple warnings and had responded with false promises. Additionally, this evidence was being used to discover whether the systems infringed the patent, and therefore bore a substantial relationship.

The issue with the “SafeNet system” regarded the interpretation of a contract -  a sub-licence agreement between Alexsam and MasterCard. The activation was determined to be sub-licensed using plain language.

Finally, IDT argued that claims 57 and 58 of the‘608 Patent were invalid for as they were obvious in view of (‘038 Patent). This patent describes, however, an activation terminal that transmits the card’s “serial number”, the cash value and “other consumer data." As an unmodified POS cannot transmit consumer data, this argument was rejected. In the alternative, IDT argued that the ‘038 patent in combination with two other patents made claims 57 and 58 invalid. The company neglected to produce any expert evidence, which is necessary where the subject-matter is complex and not easily understood by a layperson. Therefore, this argument was also rejected.

Interestingly, in his dissent Circuit Judge Mayer found claims 57 and 58 of the ‘608 patent to be invalid. He stated that there was no infringement because these claims fail to meet the requirement for subject matter eligibility found in . These claims were said to disclose only an abstract idea for an efficient business practice, using an unmodified POS device already commonly used for processing credit card transactions, thereby disclosing no inventive concept. As such, the claims do not adhere to the patent bargain which grants inventors a 20-year monopoly on an invention in exchange for bringing new and useful advances of technology into the public.

IDT Corporation was one of several companies defending allegations of infringement of this patent. Companies that have been named as defendants in include: Best Buy, Barnes and Noble, The Home Depot, McDonald’s, Toy’s “R” Us, and JC Company. At issue in these cases are not only gift cards and phone cards, but also include customer loyalty cards and medical information cards. Recent attempts by these parties to invalidate the patents held by Alexsam have failed. The effects of the decision from Alexsam Inc v IDT Corporation on these cases is unclear at this point. The only thing that is certain? This is not the last of the gift card patent saga.

Naomi Metcalfe is an IPilogue Editor and a JD Candidate at Western University.

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