The Medicines Patent Pool

The (MPP) is a United Nations-backed organization that aims to improve access to HIV medicines for people living in LDCs. In 2014 they launched the (PHTI) to focus on a pressing concern in the African continent: overcoming barriers to develop paediatric formulations of HIV medications. In , they obtained a licence from Merck to develop paediatric formulations of raltegravir, adding this key drug to their pool that already includes lopinavir and ritonavir with AbbVie Inc.

In the , generic manufacturers in the specified LDCs are allowed to research and develop alternate or improved formulations of raltegravir for children. Considering those living in LDCs cannot afford these medications, Merck will not be cannibalizing its own sales. This agreement is significant because Merck retains the right of first refusal of licensure or purchase if the manufacturer develops an improved formulation and intends to market the product outside of the specified countries they serve.

A Unique Opportunity

Improved or altered formulations are methods for drug manufacturers to retain a portion of market share when the patent of the original drug expires (see for example �����Ի���). By expanding the range of licensing agreements beyond HIV medications, drug manufacturers can outsource R&D of new formulations of their patented drugs at no upfront cost, while improving access to life-saving medicines in LDCs. Empowering LDCs to develop its own drug manufacturing industries has many advantages over the traditional method of directly donating medications.

Win-Win?

In the years to come the effects of the patent cliff will continue to eliminate important sources of revenue for Big Pharma. These companies also face the need to increase R&D budgets to avoid grinding drug development to a halt. Undoubtedly, cost-effective ways to extract value from current patents will be crucial. Thus, Big Pharma should pursue an expansion of licensing opportunities with organizations such as MPP with great interest since it serves the dual purpose of improving drug access in developing nations while potentially extending the life cycle of their patented drugs.

Jason Ho is an IPilogue Editor and a JD Candidate at Osgoode Hall Law School.

The post Breaking the Fall Off the Patent Cliff: Can Developing Countries Help Big Pharma? appeared first on IPOsgoode.

The Facts

In 1997, pharmaceutical giants Apotex and Eli Lilly became entangled in a patent dispute regarding the antibiotic cefaclor. In 2009, the Federal Court found that Apotex infringed at least one valid claim in each of eight patents owned by Eli Lilly (). On January 23, 2015, the Federal Court released its decision (Lilly) regarding the quantum of damages to be paid by the defendant.  The awarded damages were approximately $106 million in total. $31 million was the damage award, and due to a span of 17 years between the commencement of the proceeding and the final disposition, the prejudgment interest, compounded, was approximately $75 million. Unsurprisingly, Apotex has filed a notice of appeal.

To Delay or Not to Delay: Expanding a Supreme Court Decision

, a partner at McMillan LLP, writes in his , “there is a school of thought among litigators that delay tends to favour the defendant”. He also alludes to changes in corporate structure over time where new managers may be more willing to settle a case on favourable terms. Justice Zinn’s decision in Lilly may cause defendants to reconsider whether delay is a good strategy.

The Ontario and the provide similar provisions for simple prejudgment interest unless the interest is “payable by a right other than under this section.” The refusal to award compound interest by default is criticized by many including contracts expert . Swan writes that “hostility to compound interest might have been understandable in an age before handheld calculators, … computers; the refusal now to award it can have no justification” [1].

Justice Zinn in Lilly based his award of compound prejudgment interest on the Supreme Court’s decision in (Bank of America). There, the Supreme Court recognized the “time-value” of money and supported awarding compound interest where that remedy is most appropriate in fully compensating the plaintiff. Compound interest was available to Eli Lilly due to , which provides that the infringer is liable to the patentee “for all damage sustained” by reason of infringement. Justice Zinn went further in Lilly to say that “in today’s world there is a presumption that a plaintiff would have generated compound interest on the funds otherwise owed to it and also that the defendant did so during the period in which it withheld the funds" [para 118].

Implications

The willingness of the Federal Court in awarding compound prejudgment interest is as a step in the right direction for patent litigation. As the Supreme Court recognized in Bank of America, a party's ability to utilize money is a factor in the compensation principle. In the case at hand, Apotex had the opportunity to invest money that rightfully belonged to Eli Lilly and earn compound interest on that sum for 17 years. Had the company been ordered to pay simple prejudgment interest, it would have benefitted from litigation delay. Unjust enrichment of this sort promotes and prolongs litigation by providing an incentive to first infringe upon another’s patent, then to delay the court process.

If Lilly is upheld on appeal, there will be broader implications. Those who are already involved in long-standing litigation relating to patents, industrial design, trademarks, and copyright will likely consider settling their cases to avoid paying huge sums for compound interest.

It will be very interesting to see how the Federal Court will treat Lilly in subsequent decisions, now that Justice Zinn has demonstrated a willingness to extend the principles in Bank of America into intellectual property litigation.

Jason Ho is an iPilogue Editor and JD Candidate at Osgoode Hall Law School

[1] Angela Swan & Jakub Adamski, Canadian Contract Law, 3d ed (Markham: LexisNexis, 2012) at 712.

The post Paying for Delay: Old School Lawyering Meets Compound Interest appeared first on IPOsgoode.

Background

Teva Pharmaceuticals developed a medication for the treatment of multiple sclerosis called Copaxone. Sandoz Pharmaceuticals submitted to the Food and Drug Administration to develop generic versions of Copaxone. Teva launched a suit in 2012 claiming patent infringement under . “Average molecular weight” was a disputed term which Sandoz claimed to be ambiguous.

After hearing expert evidence, the district court found the term to not be ambiguous, and that Sandoz infringed Teva’s patent. Sandoz appealed to the Federal Circuit Court of Appeal, arguing that “average molecular weight” was “insolubly ambiguous”. The Federal Circuit heard the case de novo without giving deference to the district court’s factual determinations, and unanimously reversed the lower court’s decision. Teva for writ of certiorari to SCOTUS. The petition was granted and were heard on October 15, 2014, and the decision was published on January 20, 2015.

Arguments by Sandoz

In the oral arguments, counsel for Sandoz relied heavily on , a significant case where SCOTUS determined that the interpretation of patent claims are questions of law rather than questions of fact. Sandoz claimed that even fact-finding becomes a legal inquiry, since the district court has to make a legal inference of a fact to put it into context of the patents-in-suit. Being questions of law, Sandoz argued that the Federal Circuit need not give deference to district courts and was correct in reviewing such claims de novo. Moreover, enforcing deference to the district court will create a “cottage industry of trial lawyers fighting with the judge about which bucket some particular evidence fits into”.

Arguments by Teva

Counsel for Teva pointed to the convention of the judicial system where district court judges find the facts and the Courts of Appeal review those fact-findings deferentially under Rule 52(a). They argued that patent construction claims are hybrids, containing a mix of questions of law and fact. Some cases, like this case, is one where factual findings by themselves point to the correct outcome since the ultimate legal conclusion rests on fact-finding.

Decision

The majority of SCOTUS held that when reviewing a district court’s resolution of subsidiary factual matters made in the course of its construction of a patent claim, appellate courts must apply a “clear error”, not a de novo, standard of review. They distinguished between evidence intrinsic and extrinsic to the patent. In reviewing intrinsic evidence, a district court judge’s determination is solely a determination of law, which appellate courts can review de novo. When a district court requires extrinsic evidence and consults experts to settle factual disputes, the judge’s determination is a factual finding that must be given deference unless a clear error has been made.

With regards to Sandoz’s argument that it may be difficult to separate “factual” or “legal” questions, SCOTUS stated that courts of appeals have long been able to separate factual from legal matters. As a result, SCOTUS determined that the Federal Circuit in this case erred in law in failing to review factual findings only for clear error.

Analysis

SCOTUS has settled the controversy in the applicability of Rule 52(a) in relation to patent construction claims that extends beyond the pharmaceutical industry. The decision promotes consistency in the law and judicial integrity of factual determinations at large. Moreover, with on appeal, reviewing patent construction claims de novo provides an incentive for unnecessary litigation, increases trial costs, and arbitrariness of decisions.

Long-term implications from this ruling are less clear. It is to be expected that district court judgments on patent construction claims will not be appealed as often as before, and litigators will shift the focus of their claims on factual determinations to gain higher certainty on appeal. Since fact-finding often requires expert testimony, litigants will spend a greater amount of resources hiring experts, adding to the complexity for district court judges to explain their judgments in areas where they themselves may not have expertise.

Beyond the pharmaceutical industry, the emphasis of fact-finding in the district court and what constitutes a “clear error” on appeal may have shifted patent litigation in favour of those with deeper pockets to hire experts. It is unclear how this ruling will affect smaller players who claim to have their patent rights infringed by large companies.

Nonetheless, Teva v Sandoz provides greater clarity in litigation for patent construction claims and resolves the controversy of the applicability of Rule 52(a) towards appellate courts.

Jason Ho is an IPilogue Editor and a JD Candidate at Osgoode Hall Law School.

The post A Dose of Consistency: SCOTUS Settles the Controversy in Teva v Sandoz for Patent Litigation appeared first on IPOsgoode.