Move Over Pharma

Bring up the subject of intellectual property litigation and everyone wants to talk about high-profile and hotly contested pharma litigation. “Since the inception of the Patented Medicines Notice of Compliance (PMNOC) Regulations in 1993, pharma cases have dominated the IP litigation landscape in Canada,” says David Aitken, managing partner of boutique IP litigation law firm Aitken Klee LLP in Ottawa. But going forward, says Aitken, “I think we are going to start to see non-pharma cases take a larger share of the legal IP litigation spend in the coming years.”

There are a number of factors conspiring to reduce drug litigation, he says, including the so-called “patent cliff” as many of the patents covering the “blockbuster” drugs were filed in the early to mid 1990s and are expiring over the next few years. While many less significant drugs remain under patent protection, the smaller dollar amounts at issue provide less incentive to fight protracted and expensive legal battles. In addition, “recent regulatory changes have reduced the pricing of generic drugs, which again makes it more difficult to justify the cost of patent litigation,” he says.

Steven Garland, managing partner of the Ottawa office of Smart & Biggar/Fetherstonhaugh, says, in his practice, he’s “certainly seeing more non-pharma litigation. One area gaining steam is patent litigation coming out of the oil patch, which has always been a pretty fertile ground for innovators and for patentees.”

“There are all sorts of reasons why a patentee might want to sue, because ultimately the patent’s a commercial asset,” says Garland. Perhaps the goal is to exclude others from practising that technology, be the only business with that product in the marketplace, or license the technology. “But sometimes you’re not really getting people engaged on the issue unless you actually have to assert your exclusive rights, even if the goal downstream is to come up with some kind of a commercial arrangement.”

Alberta’s economy is humming and it’s a very entrepreneurial-type mindset of people there, adds Garland. Throw into the equation “several cases where a patentee oil and gas case has been successful and led to some pretty significant damage awards, and you see a significant rise in patent litigation based on oil and gas-related technology and related technologies,” he says.

Aitken agrees on the non-pharma IP litigation side, there’s growth in a number of industry sectors, including oil and gas and telecommunications. “With the success of the oil sands and the increasing number of players in the telecommunications sector, it seems likely that the growth will continue,” he says.

However, in the non-pharma sectors, he says, “litigation is likely to remain largely episodic, usually arising in a hotly competitive industry sector serviced by players using similar technology and having sufficiently deep pockets to acquire, maintain and enforce a patent portfolio.” Yet these circumstances do not come along every day, he points out, making it difficult to determine whether a spike in the number of oil and gas cases is a random phenomenon, or is indicative of a longer-term trend.

“We’re returning to a more traditional paradigm of what dictates when you sue,” says Aitken. “Which is ‘do you have a patent and is it infringed and can you recover your legals?’ It’s not being driven because that’s what you have to do to get on the market.”

Still, any shift needs to be put into context, he says, suggesting that the incentive to litigate pharmaceuticals in Canada will not go away in the short term. “Drug patent litigation is driven by a patent regulatory scheme that virtually entrenches patent litigation as a necessary component of the regulatory process. So long as the present regulatory scheme remains in place, pharmaceuticals will continue to be hotly litigated.”

Several other fairly recent trends in patent litigation of interest to businesspeople – and potentially their chequebooks – are as a direct result of actions undertaken by the Federal Court of Canada. According to Ronald Dimock, founding partner of Toronto-based intellectual property law firm Dimock Stratton LLP, a “top trend in patent litigation relating to the Federal Court, where 95 per cent of the patent cases are litigated in Canada, concerns timing and scheduling.”

“The Federal Court of Canada is very user-friendly for IP litigation. The court will give you a trial date, generally within two years, very early on in the litigation, which only recently the court has started doing,” says Dimock. In addition, he says, “you’re pretty much guaranteed case management of a patent case in the Federal Court,” making it increasingly difficult to engage in a plethora of motions, pleadings and other tactics designed to frustrate opponents.

But when the case does go to trial, says Dimock, “judges are now willing to deal with not only the issues on the merits, but also decide the quantum of monetary remedies at the same time, also a new trend in patent cases. You can have a judgment on money sooner than you’ve had in the past.”

Garland also finds a greater emphasis by the court over the last few years to assist litigants in getting to trials sooner, rather than having proceedings that sit on the federal court docket for long periods of time as deadwood.

For Canadian business this means, he says, “if they’re going to be potential litigants, whether it’s a plaintiff or defendant, IP rights owners now, I think, are looking at the federal court as a good forum within which to litigate their IP rights.” So no more dragging your heels, which helps to explain the increase in the number of trials. Still, many, many cases outside of pharma, he says, are being settled.

In fact, Dimock is seeing an upswing in the amount of alternate dispute resolution and mediation, and, in many situations, a subsequent settlement in IP litigation. Although it has always been necessary for lawyers to advise and encourage clients to settle, he says, the judges are increasingly putting pressure on litigants to talk settlement.

According to Dimock, “ADR is now an important aspect of any litigious dispute, but especially in areas like patent litigation where legal fees run high, litigation is expensive, case management is intensive and trials are long in duration.”

For his part, Aitken “hasn’t seen a significant move toward ADR in high-stakes IP litigation, where the position of the litigants often becomes firmly entrenched and there are fewer opportunities to pursue a negotiated settlement.”

In June, the federal government passed the omnibus Bill C-31, the Economic Action Plan 2014 Act, No. 1. The Act contained sweeping new amendments to the Trade-marks Act, aimed at bringing Canada more in line with international trade-mark application processes and standards.

As to the broader implications for IP litigation under the amendments, Dimock says one of the key changes is that “use” will no longer be required to obtain a trade-mark registration. “The controversial removal of the use requirement may open the door to ‘trade-mark trolls’ in Canada,” says Dimock, “who may now be able to register trade-marks without initially having to show use of this mark in Canada or elsewhere.”

Further, without the use requirement, Dimock suggests trade-mark applicants will tend to over claim goods and services, which may block others from legitimately using the same mark with different and non-confusing goods.

While use of a trade-mark in Canada will remain the guiding principle for the recognition of trade-mark rights, says Dimock, the amendments will likely create initial uncertainty regarding entitlement. “This has the potential to result in an upswing in opposition, expungement and litigation proceedings to prevent or cancel third party registrations for confusing marks that are not in use or have overly broad goods and services,” he says.