Federal Court opines on precedential value of prior PM(NOC) proceedings and scope of experimental use exception to public disclosure

Ryan Sheahan and Jessica Rutledge - 

The Federal Court’s decision in the consolidated proceedings of Bayer Inc. v Cobalt Pharmaceuticals Company  offers useful guidance as to the precedential value of proceedings under the Patented Medicines (Notice of Compliance) Regulations (PM(NOC)) in the context of subsequent infringement actions involving the same patent.  It also provides helpful direction in respect of the scope of the Canadian experimental use exception to anticipatory public disclosure.  

Background:  Patent at Issue

Both the PM(NOC) proceedings and the Federal Court infringement action concerned Bayer’s Canadian Patent No. 2,383,426 (the ‘426 Patent).  The ‘426 Patent relates to a pharmaceutical combination of ethinylestradiol and drospirenone for their use as a contraceptive.  Ethinylestradiol functions as an estrogen, and drospirenone as a progestogen, and both were known to inhibit ovulation when used in combination.  The ‘426 Patent contemplated a novel formulation using rapidly-dissolving drospirenone particles, which delivered unexpectedly consistent bioavailability.  This was unexpected because drospirenone was known to be inactive at an acidic pH of 1 when tested in a laboratory setting, and the normal pH range of the stomach is 1.0 to 3.0.  However, traditional coatings that would protect the drospirenone from the stomach environment released the drospirenone at variable rates, resulting in irregular effectiveness in different people.  Bayer tested a rapidly-dissolving particulate version of drospirenone in clinical trials with women, and discovered it was effective as a contraceptive in the ethinylestradiol combination, and did not degrade or require any coating.  Bayer patented this formulation of the contraceptive in the ‘426 Patent, with an effective Canadian filing date of August 31, 2000, and currently markets two products known as “Yaz” and “Yasmin”, which incorporate the patented invention, with different doses of ethinylestradiol .

Background:  Previous PM(NOC) Proceedings and New Infringement Action

In Canada, a generic drug manufacturer can seek approval to market (a “Notice of Compliance” or NOC) a generic version of a brand name drug by filing an Abbreviated New Drug Submission (ANDS) with Health Canada.   An ANDS cross-references the submissions for the approved brand name drug and includes bioequivalence studies and data to establish that the generic product is pharmaceutically equivalent.  Such bioequivalence studies generally cost less and take less time than the clinical trials required to be conducted to obtain the initial approval for the brand name drug.

The PM(NOC) allow brand name manufacturers to list one or more patents it may have that claim any aspect of the brand name drug (e.g. the medicinal ingredients, the dosage form, formulation, and/or uses) on Health Canada’s Patent Register.  Pursuant to the PM(NOC) Health Canada cannot approve a generic drug product until the expiry of the last listed patent, unless the generic manufacturer has served a notice of allegations on the brand manufacturer challenging the validity of one or more listed patents and/or alleging that the generic product does not infringe such patents.  The brand manufacturer has the option to bring an application to the Federal Court seeking an order to prohibit Health Canada from approving the generic drug product on the basis that the allegations of invalidity or non-infringement are not justified.  If the Court concludes that the allegations of invalidity or non-infringement are justified, Health Canada can approve the generic drug product.

Bayer listed its ‘426 Patent on the Patent Register against its Yaz tablets.  Both Apotex and Cobalt sought regulatory approval of their generic versions by comparison to the Yaz tablets and serving notices of allegations on Bayer with respect to the ‘426 Patent, in two PM(NOC) proceedings:

  • In December 2011, Cobalt sought approval for its proposed generic version of the Yaz tablet.  In seeking a Notice of Compliance, Cobalt alleged both that its drug did not infringe Bayer’s ‘426 Patent, and that the ‘426 Patent was invalid.  Bayer was successful in its application to prohibit the Minster of Health from issuing a Notice of Compliance in Bayer Inc v Cobalt Pharmaceuticals Company (Bayer v Cobalt), which was then upheld by the Federal Court of Appeal. [Cobalt Pharmaceuticals Company v Bayer Inc (Cobalt v Bayer)].
     
  • In July 2012, Apotex initiated similar proceedings for approval of its generic version of Yaz, claiming both non-infringement and invalidity of the ‘426 Patent.  On Bayer’s application to prevent Apotex’s Notice of Compliance, the Federal Court again upheld the validity of the ‘426 Patent, but found Bayer had not met its burden of proving that Apotex’s product fell within the scope of the ‘426 Patent’s claims (i.e., the allegations of non-infringement were found to be justified).  [Bayer Inc v Apotex Inc ] (Bayer v Apotex) Apotex subsequently obtained approval of its generic Yaz, and was able to bring the product to market.

Following these PM(NOC) proceedings, Bayer commenced three separate actions for infringement, one against Cobalt for the manufacture and sale of its Yasmin generic, and the other two against Apotex for the manufacture and sale of its Yaz and Yasmin generics, all of which were consolidated by the Federal Court.  Both Cobalt and Apotex denied the infringement allegations and, by counterclaim, alleged the ‘426 Patent’s claims were invalid for obviousness, anticipation, disclosure, overbreadth, insufficiency and lack of utility.  Bayer was successful in upholding the validity of the ‘426 Patent, and the Federal Court found infringement in all three cases. 

Federal Court Decision:  Precedential Value of the Prior PM(NOC) Proceedings

In coming to its decision in respect of the infringement claims and counterclaims for invalidity, the Federal Court provided a detailed analysis of the precedential value of prior PM(NOC) proceedings involving the same patent.  At the outset, the Court confirmed that the principles of stare decisis and comity apply where courts are exercising the same jurisdiction, for instance in PM(NOC) proceedings involving a patent previously considered in the PM(NOC) context.  However, courts considering a subsequent action for infringement are not exercising the same jurisdiction as courts that made findings in the PM(NOC) context.

The Federal Court noted that PM(NOC) proceedings are summary in nature, address different issues than trials, and use only affidavit evidence.  As such, they cannot result in a final determination of validity or infringement.  However, certain findings will be either prima facie binding, or potentially persuasive:

  • Questions of law:  pronouncements of higher courts on questions of law are binding on lower courts.  In the patent context, the construction of claims is treated as a question of law, and therefore the principle of stare decisis applies.  In this case, the Court found that the Federal Court of Appeal’s prior construction of the ‘426 Patent in Cobalt v Bayer was prima facie binding, but did note that the construction could be revisited if warranted by new evidence.  Claims construction includes the definition of the patent’s “inventive concept” and its “promise”.
  • Questions of fact or mixed fact and law: previous findings involving fact-based inquiries are potentially persuasive, but should be determined anew based on the evidence adduced at trial.  The Court confirmed that the determination of the person of ordinary skill in the art, as well as assessments of obviousness, ambiguity, overbreadth, utility and insufficiency were all questions of mixed fact and law. 

In this particular case, the Federal Court did not choose to depart from the Federal Court of Appeal’s construction of the claims.  Nor did it depart from any of the Federal Court of Appeal’s findings regarding the validity of the ‘426 Patent, in respect of the three grounds for invalidity (of the six argued at trial by the defendants) that were previously argued in the PM(NOC) proceedings.

As noted above, the Federal Court found infringement in all three of the joined cases.  In doing so, the Court agreed with the Federal Court of Appeal’s infringement analysis in the Cobalt v Bayer case, but the result differed from the Federal Court’s decision in the Bayer v Apotex case.  Essentially, the infringement claims turned on which expert evidence the Court accepted, in the context of a far more extensive inquiry at trial than was undertaken in the PM(NOC) context.

Federal Court Decision:  Regulatory Approval Trials Constitute Experimental Use

The case also provides useful analysis of the experimental use exception to anticipatory public disclosure.  Pursuant to s. 28.2 of the Patent Act, if a patentee discloses the subject matter of a patent to the public over a year before the patent’s filing date, to a degree that would enable the skilled person to practice the invention, the patent is invalid for anticipation. 

More than one year before the filing date, Bayer conducted clinical studies of oral contraceptives as indicated by the ‘426 Patent.  Apotex and Cobalt argued that these clinical studies constituted an enabling disclosure.  The Federal Court did not find these trials constituted an enabling disclosure, holding that reverse-engineering the tablets would have required inventive insight to discover the inventive concept.  In addition, the Court noted that even if the trials did constitute disclosure, the experimental use exception would apply.  Though not codified in the Patent Act, Canadian law has long held that there is no anticipatory disclosure where a prior use is experimental, and that an inventor may use any means of testing available to him or her that is reasonable and necessary, and done in good faith for the purposes of perfecting or testing the merits of an invention.

In this case, the Federal Court agreed with the application of the experimental use exception as applied in Bayer v Apotex,which noted the exception’s particular applicability in cases where public testing is a necessity.  In the case of oral contraceptives, clinical studies are necessary to prove a drug is safe and effective, and to gain government approval for sale, and both are compulsory steps for commercialization of the drug.  Apotex argued that the last round of clinical trials could not be experimental as they were undertaken for governmental approval and not to prove the drug was safe and effective.  However, the Federal Court found that such a purpose did not bring the trials outside the experimental use exception, as one of the purposes of regulatory approval is to confirm the safety and efficacy of a drug.

Next Steps

The issue of appropriate relief was bifurcated from the issues of validity and infringement.  On October 27, 2016 in Bayer Inc v Cobalt Pharmaceuticals Company,the Federal Court ordered that Bayer could was entitled to elect between an accounting of the profits of Apotex and Cobalt, or all the damages sustained by their infringement of the ‘426 Patent.  

Both Cobalt and Apotex have appealed the Federal Court’s decision.  

Interlocutory Injunction in Trade-mark Infringement Action Upheld by Federal Court of Appeal

Justine Whitehead and Komil Joshi -

On April 23, 2015, in Jamieson Laboratories Ltd. v. Reckitt Benckiser LLC and Reckitt Benckiser (Canada) Limited 2015 FCA 104, the Federal Court of Appeal upheld a decision granting an interlocutory injunction against a defendant in a trademark infringement suit.  Successful motions for such interlocutory relief are relatively rare in the Federal Court, and this case provides some interesting insight into the type of evidence that might allow a moving party to obtain such relief.

Background Facts

The facts of the case have their origin in activities undertaken in 2012, when Reckitt Benckiser LLC and Reckitt Benckiser (Canada) Limited (Reckitt) decided to enter the North American market in respect of supplements containing omega-3 fatty acids.  In pursuit of this goal, Reckitt engaged both Schiff International, Inc. (Schiff) and Jamieson Laboratories Ltd. (Jamieson) in acquisition talks.

Reckitt acquired Schiff in December 2012, and thereby gained rights to Schiff’s trademark MEGARED, which had been used successfully in the United States in association with a line of omega-3 supplement products. 

The next month, Jamieson decided to undertake the rebranding of its own line of omega-3 fatty acid products in Canada from SUPER KRILL to OMEGARED.  In June 2013, Jamieson launched the new brand in Canadian stores.

This launch prompted two warning letters from Reckitt, which had not yet launched the MEGARED product in Canada.  Jamieson refused to withdraw or rebrand its product.  Accordingly, on October 16, 2014, Reckitt initiated an action for infringement of its MEGARED trademark.  On November 28, 2014, Reckitt also filed a motion seeking interlocutory injunctive relief to prohibit Jamieson from using the trademark OMEGARED, and mandating the recall of products and other materials that would offend the terms of the prohibition.

Test for Obtaining an Interlocutory Injunction

In determining whether to grant the interlocutory injunction, the Federal Court applied the tripartite test set out in RJR-MacDonald Inc. v. Canada (Attorney General) [1994] 1 SCR 311 [RJR-Macdonald],which required Reckitt to establish:  (1) a serious issue to be tried on the merits of the case;  (2) that Reckitt would suffer irreparable harm if the injunction were not granted; and (3) that the balance of convenience favours granting the injunction.

Court Analysis

(1)  Serious Issue to be Tried

The threshold for establishing a serious issue is a low one.  Unless it can be shown that the moving party’s arguments are frivolous or vexatious, a serious issue will be made out.

In considering whether a serious issue of potential trade-mark infringement had been established by Reckitt, the Federal Court found that the timing of Jamieson’s re-branding strategy was a deliberate strike to prevent MEGARED from gaining acceptance in the Canadian market, and the trial judge proceeded to conduct a fairly detailed overview of the merits of the case. 

On appeal, Jamieson argued (and the Federal Court of Appeal agreed) that the Federal Court judge delved too deeply into the merits of the underlying action.  However, the Court of Appeal found that the trial judge gave sufficient reasons to conclude that Reckitt had established a serious issue of potential trade-mark infringement.

(2)  Irreparable Harm

In RJR-Macdonald, the Supreme Court of Canada confirmed that the term “irreparable harm” defines “the nature of the harm suffered rather than its magnitude.”  There is a high standard for establishing irreparable harm, and Federal Court case law requires specific and clear evidence demonstrating that monetary damages are insufficient relief.

In upholding the Federal Court’s determination that Reckitt had, indeed, established irreparable harm, the Federal Court of Appeal agreed that Reckitt’s potential harm would be impossible to quantify, and noted that it “makes no practical sense to require a plaintiff to demonstrate such damages as lost sales or price reductions when the only market environment in which the plaintiff has ever operated has been one in which the alleged infringer has operated as well”.

(3)  Balance of Convenience

The trial judge decided that the balance of convenience favoured Reckitt, concluding that Jamieson had failed to demonstrate irreparable harm if the injunction issued.  The Federal Court found that the potential harm from reverting to the trademark SUPER KRILL was compensable by damages, and that Reckitt had made an undertaking to cover such damages.

The Federal Court of Appeal agreed that there may be potential irreparable harm to Jamieson’s reputation, given the “forthwith” nature of the injunction originally sought.   To address this issue, the Federal Court varied the terms of the order to give Jamieson 30 days from the date of the order, as varied on appeal, to comply with the injunction.

Conclusion

The case provides interesting insight into the applicability of the RJR-Macdonald test in the context of a trademark infringement matter, and provides an additional opening to plaintiffs who have yet to enter a market to try to establish irreparable harm allowing for interlocutory relief.

Federal Court of Appeal clarifies Industrial Design Act

Justine Whitehead and Gina Demczuk - 

In Zero Spill Systems (Int’l) Inc. v Heide (Zero Spill), the Federal Court of Appeal (FCA) has clarified that a functional feature of an industrial design may be protected under the Industrial Design Act.

The underlying action involved four plaintiffs, and concerned allegations of patent and industrial design infringement with respect to fluid containment apparatuses that were manufactured and distributed by the defendants (referred to collectively herein as “the Heide Defendants”) for use in oil field operations.  While many arguments with respect to patent infringement were raised at the Federal Court and FCA, this post will focus solely on the arguments with respect to the industrial designs. 

The Federal Court initially dismissed the action (see 2013 FC 616), and Zero Spill appealed all of the Federal Court’s findings.  In particular, the Federal Court held that the Heide Defendants had not infringed Canadian Industrial Design 86,793 (the ‘793 Design), by selling a line pipe tray known as a “CAPP tray”, which is designed to capture fluids that leak or are spilled during oil field operations. The Federal Court’s reasons revolved around paragraph 5.1(a) of the Industrial Design Act, which states that “[n]o protection afforded by this Act shall extend to features applied to a useful article that are dictated solely by a utilitarian function of the article”.

Although there were many similarities between the ‘793 Design and the CAPP tray, and despite the fact that the Heide Defendants had used Zero Spill’s product as a model for their own, the Federal Court found that Zero Spill had failed to prove infringement on a balance of probabilities.  In particular, the Federal Court noted that Zero Spill had not addressed the “legal distinction between design features that are visually appealing and those that are purely functional or utilitarian”.   The Federal Court’s reasons indicated that because many features of the ‘793 Design were in some way functional, these features were also unprotectable pursuant to paragraph 5.1(a) of the Industrial Design Act, notwithstanding that they might also appeal to the eye.  

Furthermore, the Federal Court found that Zero Spill had failed to lead evidence establishing that the CAPP tray had trenched on the visual features of the ‘793 Design. As the Federal Court held that the plaintiffs carried the burden of proving that the CAPP tray infringed the ‘793 Design, the Federal Court found that Zero Spill had failed to prove infringement on a balance of probabilities.

On appeal, Zero Spill argued that it had no burden under paragraph 5.1(a), and rather, the burden was on the Heide Defendants to show that the paragraph applied. Second, Zero Spill argued that paragraph 5.1(a) only excluded features that were dictated solely by their function, rather than all features which may have some coincident function.

In agreeing with Zero Spill’s arguments, the FCA stated that subsection 7(3) of the Industrial Design Act, creates a presumption of compliance with the entire Act.  Subsection 7(3) of the Industrial Design Act states that the certificate of registration for an industrial design is sufficient evidence, in the absence of proof to the contrary, “of the design, the originality of the design, of the name of the proprietor, of the person named as proprietor being proprietor, of the commencement and term of registration, and of compliance with [the Industrial Design Act]”.

In overturning the Federal Court, the FCA held that the effect of this subsection is to place the burden on the defendant in an infringement action to challenge the validity of the registration. One way to rebut the presumption would be to successfully invoke paragraph 5.1(a) of the Industrial Design Act.

As a result, the FCA held that the defendants were required to plead that certain features of the design were unprotectable because they were dictated solely by function. As the defendants had failed to do this, the Federal Court’s finding of non-infringement could not stand, and the issue of infringement was remitted back to the Federal Court for redetermination.

With respect to Zero Spill’s second submission, the FCA clarified the protection afforded under paragraph 5.1 (a) of the Industrial Design Act, and disagreed with the Federal Court’s finding that all functional features of an industrial design are unprotectable by virtue of paragraph 5.1(a), despite the fact that these features may also appeal to the eye.  In its reasons, the FCA found that this interpretation ran counter to the ordinary meaning of paragraph 5.1(a), and the purpose of the Industrial Design Act. As paragraph 5.1(a) states that “features … dictated solely by a utilitarian function” (emphasis added), are unprotectable, the FCA found that features could be both useful and visually appealing. In these circumstances, paragraph 5.1(a) could not apply.

Furthermore, the FCA noted that under subsection 64(2) of the Copyright Act, an article is exempt from copyright protection if there have been more than 50 copies made, and if the article is functional. In light of this, the FCA found that the Industrial Design Act would serve no purpose if it did not protect functional features. The FCA found that both the text of paragraph 5.1(a), and the underlying purpose of the Industrial Design Act confirmed that “functional features of designs may be protected under the Act. Only those features whose forms are dictated solely by function are not protected.” 

Federal Court rejects inventorship claim: design input does not a co-inventor make

Justine Whitehead and Erica Lindberg

On September 16, 2014, in Drexan Energy Systems Inc. v. Canada (Commissioner of Patents), the Federal Court rejected a claim by Drexan Energy Systems Inc. (“the Applicant”) to have two additional individuals named as co-inventors of the heating cable described in Canadian Patent 2,724,561 (the ‘561 Patent). The decision confirms the test for inventorship, and provides guidance on the distinction between mere helpful involvement in the development of a product, and a contribution to an inventive concept that would be sufficient to allow the contributor to be named a co-inventor.

Heating cables are incorporated into pipes used in cold environments to prevent the transported substances from freezing. In 2006, four individuals decided to work together to create a new type of heating cable that eliminated some of the defects in cables available at the time. By 2010, however, the relationship between the men had broken down, and only two individuals were listed as inventors on the ‘561 Patent, which was issued in 2012.

The two named inventors assigned their rights in the patent to their corporation, WWUS, which in turn assigned them to Thermon Manufacturing Co (“the Respondent”). The two unlisted individuals assigned what rights they had in the patent to the Applicant, a competitor of the Respondent.

Establishing Inventorship

Under section 52 of the Patent Act, the Court is given the authority to add or remove inventors from a patent. In this case, the Court confirmed that the applicant bears the burden of meeting the test for inventorship, which can be done by establishing a contribution to the inventive concept, even if it is others that later reduce the concept to the definite shape required for patentability. A co-inventor, therefore, does not need to be wholly responsible for the inventive concept; it is sufficient that his or her contribution is applied to that concept, as something more than mere verification.

Though the Court did not make specific reference to the inventive concept claimed in the ‘561 Patent, it did note that in this case it was the combination of particular elements that made up the inventive concept, and not the elements themselves.  In such a case, the focus of the inventorship inquiry is directed to whether the contributions of the unlisted individuals were in respect of how the elements of the patent could be combined (which would be sufficient to have them named as co-inventors), or whether they were directed only to suggested features and individual elements of the patent. The decision references the Federal Court’s confirmation in Weatherford Canada Ltd. v. Corlac Inc. that in a combination patent it is the combination itself that is the novelty, and as such, even if a certain element is contributed by a person, that person would not have contributed sufficiently to the inventive concept to be called a co-inventor.

In this case, the Applicant argued that between 2006 and 2008, the unlisted individuals contributed to the inventive concept in several ways: i) in 2006, a phone conversation in which  one of the unlisted individuals  described his idea for a new heating cable; ii) in 2007, a presentation to Fujikura Inc. in hopes of obtaining funding; and iii) in 2007, a collaborative brainstorming session in which both unlisted individuals participated and suggested some concepts that ended up in the patent. The Applicant claimed that as a result of the brainstorming session, there was a definite and practical shape to the invention and that at that point, the inventive concept existed and had been contributed to.

The Respondent, in arguing that the unlisted individuals made no contribution to the inventive concept, challenged both their expertise and their credibility, as well as the Applicant’s interpretation of the law on inventorship. In particular, the Respondent argued that a mere idea or suggestion is not inventive; it must actually be reduced to practice in order to meet the test, and in all instances of contribution raised by the Applicant, this threshold was not met.

Analysis of the Claim

In focusing the inquiry on whether a contribution had been made to the novel combination of several elements that amounted to the inventive concept, the Court drew an analogy between two competing products with different advantages and disadvantages. It would be nothing special, the Court reasoned, to merely suggest a new product with all the advantages of both products and none of the disadvantages; the real ingenuity is in the process of creating a product with the desired attributes of both.

Ultimately, however, the Court was not convinced that acceptance of the inventorship claim was appropriate for three reasons. First, the experience of the unlisted individuals, being mostly in sales, was not comparable with the expertise of the two named inventors in research, development, and manufacturing. Second, one of the named inventors was able to provide a great deal of contemporaneous documentation (in the form of design work and memorandums circulated to the other men) supporting his version of events leading up to, and following, the brainstorming session. And finally, the named inventors were able to show that they had been willing to credit one of the unlisted individuals in a separate application for a variation he proposed at one of their meetings, which the Court took as an indication of willingness to accept the unlisted individuals as co-inventors of the ‘561 Patent if they had made any inventive contributions.

In short, the Court concluded that the Applicant had not discharged its burden of proving that the input of the unlisted individuals, while useful, comprised anything more than, in this case, communicating feedback from potential customers and providing suggestions on desired features. The application was dismissed with costs awarded to the Respondent.

This decision is demonstrative of the importance of detailed record-keeping for those involved in the development of inventive concepts. Ownership of any joint project should be discussed early on, and the patent application process and its implications should be thoroughly considered by all those involved in order to avoid protracted and costly disputes.

Voltage meets resistance from Federal Court: new safeguards imposed on disclosure order to combat copyright trolling

David Elder -

In a ground-breaking order, the Federal Court of Canada has for the first time included, in an order compelling third party disclosure of subscriber information, new conditions intended to better balance subscriber privacy rights and dissuade abuse of disclosure orders by copyright owners.

In the case of Voltage v. Doe, film production company Voltage Pictures LLC had sought from internet service provider TekSavvy Solutions Inc. the disclosure of the contact information of some 2,000 internet service customers that Voltage alleged had illegally downloaded movies in which it holds copyright.  TekSavvy refused to disclose the records in question, and Voltage brought a motion for an order requiring TekSavvy to disclose the information in question.

Orders requiring an ISP to disclose the contact information of subscribers alleged to have improperly downloaded copyright-protected material are not new in Canada; however, the order sought by Voltage requested identity information for an unprecedented number of subscribers, and raised serious concerns about “speculative invoicing,” a practice whereby internet subscribers are pressured or misled into quick, and sometimes excessive settlements of infringement claims, even if they were not involved in infringement.

The Reasons for Order and Order in the Voltage case address important issues with respect to the applicable test for granting such disclosure orders, as well as the limitations that a court should impose to protect or minimize the privacy rights of subscribers.

The leading case in Canada for dealing with such disclosure orders is BMG Canada Inc. v. Doe, which suggests that an order is generally warranted where a plaintiff has a bona fide claim and meets other requirements of the Federal Court Rules. 

The Samulelson-Glushko Canadian Internet Policy and Public Interest Clinic (CIPPIC), which was granted leave to intervene in the Voltage motion, argued that in more recent jurisprudence, Canadian courts have refined the BMG test so as to require copyright owners seeking disclosure to meet the higher evidentiary standard of establishing a prima facie case of copyright infringement. The Court rejected the argument that the courts have moved to the higher standard, and applied the bona fide test from the BMG case.

CIPPIC further argued that Voltage’s true intentions were not motivated by simple enforcement of copyright, but rather by a business model of “speculative invoicing”, which seeks to intimidate individuals into settlements by way of demand letters and threats of litigation.  It was alleged that under this approach, the cost, uncertainty and stigma often coerces individuals into making payments, often well in excess of any amounts that would likely be recovered in damage awards for copyright infringement, and often from individuals that were not involved in the unauthorized copying and distribution of films on the internet.  TekSavvy argued that, as is the case in other jurisdictions, safeguards were required to help ensure that copyright owners did not misuse court-ordered discovery mechanisms

While the Court found some evidence that Voltage “had been engaged in litigation which may have an improper purpose,” it declined to make any definitive finding to that effect in the case at hand.  However, after reviewing the approaches of courts in the U.K. and the U.S. to the phenomenon of “copyright trolls”, the Court added a number of significant new conditions to its disclosure order that are intended to balance the rights of internet users who are alleged to have downloaded copyrighted works against the rights of a copyright owner to enforce its rights in those works.  Conditions to the order include the following:

  • Only names and addresses are required to be disclosed (Voltage had also sought disclosure of phone numbers and email addresses)
  • The names and addresses in question are to remain confidential, not be disclosed to any other parties with further order of the Court, and be used by Voltage only in connection with the copyright claims in question
  • Any correspondence sent by Voltage to any TekSavvy customer must include a copy of the order, and must clearly state that the no court has yet made a determination that the subscriber has infringed or is liable in any way for payment of damages
  • Such correspondence is subject to prior review and approval by the Court
  • Upon request, Voltage must provide any subscriber with a full copy of the Reasons for Order and Order, at no charge to the subscriber
  • Voltage’s action for copyright infringement, and any other actions it may commence against any of the subscribers will continue as a specially managed proceeding, subject to ongoing oversight by a Case Management Judge, who takes active role in supervising the conduct of proceedings, so as to improve efficiency and encourage fair and timely resolution

The foregoing conditions would appear likely to discourage the practice of “speculative invoicing,” particularly due to restrictions imposed on the content of any demand letters and the ongoing supervision of the Court. 

The decision promises to be significant not only for ISPs, but for a range of other third party service providers from which litigants in copyright and other civil causes may seek disclosure of customer identity information.

Nicholas McHaffie and David Elder of Stikeman Elliott LLP represented TekSavvy with respect to the Voltage demand and subsequent proceeding.

New privacy bill would require breach notification, allow Commissioner to make orders

David Elder -

In an apparent attempt to apply pressure to the government to amend the federal private sector privacy law, New Democrat Digital Issues Critic Charmaine Borg recently introduced a private members bill that would introduce mandatory data breach reporting and provide the Privacy Commissioner of Canada with direct enforcement powers.

The government’s own bill to amend the Personal Information Protection and Electronic Documents Act (PIPEDA) was introduced in September of 2011, but Bill C-12, as the bill is known, has not moved forward since that time. 

The New Democrat bill, known as C-475, differs from C-12 in several important ways.

First, C-475 would require that organizations report data breaches to the Privacy Commissioner, who would then determine whether the organization would be required to notify affected individuals (although organizations would not be precluded from providing such notice).   By contrast, Bill C-12 includes a provision that would require organizations to report data breaches to the Privacy Commissioner, as well as to notify affected individuals in certain circumstances.

Bill C-475 also contemplates what appear to be lower standards for the types of breaches that require reporting, or with respect to which the Privacy Commissioner may require notification of affected individuals, likely resulting in more reports and notifications than under the government bill. 

In this regard, Bill C-12 requires organizations to report material breaches of security safeguards involving personal information; Bill C-475 requires organizations to notify the Privacy Commissioner where a reasonable person would conclude that there exists a possible risk of harm to an individual as a result of the breach. With respect to notification of affected individuals, Bill C-12 would require organizations to notify an individual where it is reasonable to conclude that the breach creates a real risk of significant harm to the individual; Bill C-475 would provide that the Privacy Commissioner may require an organization to notify affected individuals to whom there is “an appreciable risk of harm” as a result of the breach.

Bill C-475 would also provide the Privacy Commissioner with new enforcement powers respecting compliance with PIPEDA as a whole, including the ability to issue orders requiring organizations to take corrective action to come into compliance with the law and to publish notices of any such action taken or proposed to be taken. The Bill would also provide the Privacy Commissioner with the ability to seek from the Federal Court penalties of up to $500,000 against organizations that do not comply with orders issued by the Commissioner. 

The Bill would also create a private right of action whereby individuals affected by any violation of PIPEDA that was made the subject of a Privacy Commissioner order may seek damages for losses suffered as a result of the non-compliance.

At the same time, the New Democrat bill omits several important business-friendly reforms contained in the government bill, including a clearer and more expansive carve out for business contact information and a prospective business transaction exception that would allow businesses to disclose personal information without consent in the context of certain transactions, including mergers, acquisitions and financing.

It's not over yet - Patent lapse due to clerical error may yet be saved

On July 27, 2012, the Federal Court of Canada - for the second time - quashed a decision of the Commissioner of Patents to refuse to correct a clerical error relating to Repligen Corporation’s Canadian Patent # 1,341,486.

In 2008, Repligen’s patent lapsed due to the inadvertent non-payment of its maintenance fees. Although the fees were sent to the Patent Office under Repligen’s name, they were sent with the wrong patent number. When Repligen’s new patent agents caught the mistake, they requested a correction under section 8 of the Patent Act. Section 8 gives the Commissioner the discretion to correct clerical errors in “any instrument of record in the Patent Office”. Although the Commissioner acknowledged that the error was clerical in nature, she refused to correct it. In 2010, Repligen succeeded in an application for judicial review of the Commissioner’s decision but their request for correction was again refused upon redetermination by the Patent Office.

In the present decision, the Federal Court found that the Commissioner erred by focussing on both Repligen’s lack of due diligence (in failing to detect the error) and on the possibility of prejudice to Rolls-Royce (owner of the patent belonging to the “wrong” number), without balancing these considerations against the impact on Repligen of the loss of the patent. The central issue should rather have been that Repligen intended to maintain its patent rights and continued to pay its fees (despite those fees being misdirected). The Court found that the Commissioner’s exercise of discretion should reasonably reflect the interests of both Repligen and Rolls-Royce, where both attempted to comply with maintenance fee provisions, and should be in keeping with the remedial nature of section 8 of the Patent Act. The matter has again been sent to the Patent Office for redetermination.

For more information, see Repligen Corporation v. Canada (Attorney General)

Panning for gold in the mud: the availability of privacy damages under PIPEDA

More than 10 years after the introduction of federal private sector privacy legislation in Canada, damage awards for breaches of the law have been few and far between -- and where such awards have been made, the dollar amounts awarded have been modest.

In light of the sometimes confusing, and even contradictory judgments to date, there is also considerable uncertainty as to when such damages might be awarded, and what evidentiary test a complainant might have to meet.

In Panning for gold in the mud: the availability of privacy damages under PIPEDA, in the December 2011 edition of the Canadian Privacy Law Review, David Elder of our Privacy and Data Protection Group, attempts to knit together the existing case law into a coherent analytic framework for the availability of privacy damages in Canada.

Article reproduced with permission of the publisher from Canadian Privacy Law Review, Vol. 9, No. 1, December 2011.