Seedlings Life Science Ventures, LLC v. Pfizer Canada ULC, 2021 FCA 154

In an ongoing dispute between Seedlings Life Science Ventures, LLC (“Seedlings”), a small corporation in the business of healthcare-related research and product development, and Pfizer Canada Inc. (“Pfizer”), a large pharmaceutical company, the Federal Court of Appeal (“FCA”) passed down two related decisions, one of which reaffirmed overbreadth as a valid ground of invalidity.

While clarifying the principles surrounding the doctrine, the FCA affirmed the trial judge’s dismissal of Seedlings’ claim for patent infringement covering an auto-injector medical device.

Background

The patent in question, Canadian Patent No. 2,486,935 (the ‘935 Patent”), relates to an auto-injector called LifeCard that is primarily intended for epinephrine injection to reduce symptoms of anaphylaxis. With LifeCard, the inventor sought to provide a solution to problems found with the original trademarked EpiPen® (“EpiPen”), such as bulkiness and an exposed needle after injection.

In 2017, Seedlings first initiated proceedings against Pfizer in a motion seeking the approval of a litigation agreement with a third party to fund Seedlings’ patent suit. The Federal Court (the “FC”) refused to grant the approval, the details of which can be read in our previous reporting here. Subsequently, litigation between the parties continued and led up to the trial decisions that the present appeals derive from. The first appeal (the “154 Appeal”) relates to the infringement action commenced by Seedlings against Pfizer in 2020 and the second appeal (the “155 Appeal) relates to a motion brought by Seedlings in 2019 for the admission in evidence of certain documents in preparation for trial.

The 154 Appeal

At trial, Seedlings accused Pfizer of infringing certain claims of its ‘935 Patent by selling the second generation of its epinephrine auto-injector EpiPen®. To counter, Pfizer alleged that the claims of the ‘935 Patent were invalid for anticipation, obviousness and overbreadth.

In January 2020 the FC delivered its ruling and dismissed Seedlings’ claim for patent infringement. Pfizer’s counterclaim was allowed, and several key conclusions emerged from the decision. For example, it was held that the blinding of experts during litigation is not always helpful, i.e., the practice of shielding experts from information about the parties and their positions. Seedlings had asked the court to prefer its experts’ opinions as they were shielded, in contrast to Pfizer’s. The FC refused, finding that preliminary issues, such as the identity of the skilled person and their common general knowledge, need not be determined in complete isolation from the actual issues at hand.

Central to the decision was Justice Grammond’s comments on the overbreadth doctrine and its statutory basis. Though it was conceded by Seedlings that several claims of the ‘935 Patent were invalid for anticipation, Pfizer argued further that they were invalid for overbreadth. Confirming the grounds of the doctrine, Grammond J held that the doctrine of overbreadth is a necessary consequence of the bargain theory of patent law and derives from subsection 27(4) of the Patent Act (the “Act”). The FC indicated that a finding of overbreadth will depend on whether the essential elements of the invention are missing from the claims.

Seedlings’ argument that an element cannot be deemed essential for the purposes of overbreadth where it was not found to be so at the claim construction stage was rejected. The FC reasoned that if a claim fails to include an essential element, it could not be construed in the first place. Ultimately, Grammond J invalidated the ‘935 Patent on the sole basis of overbreadth.

In obiter, the FC also considered remedies, and if an election of the accounting of profits could have been granted had there been no finding of invalidity. Accounting of profits occurs where one party is required to surrender the profits made from infringement. Drawing from the jurisprudence, Grammond J explained that he would not have allowed Seedlings to elect an accounting of Pfizer’s profits because of Seedlings’ status as a Non-Practising Entity (a “NPE”). NPEs acquire patents or patent rights while not actually practising the patented invention, meaning Seedlings never intended to manufacture, distribute or sell an auto-injector. As such, the FC reasoned that NPEs like Seedlings should not be entitled to compensation beyond a reasonable royalty.

The 155 Appeal

On this motion, Seedlings had asked the court to admit certain documents into evidence for the truth of their contents. The documents were PowerPoint presentations containing information relating to the marketing of the EpiPen and were produced in response to questions raised during discovery. Though the parties had agreed they could be entered into evidence and recognized their authenticity, Pfizer refused to acknowledge that they could be relied upon for the truth of their contents.

What hinged on their admittance was whether the FC was prepared to identify the documents as business records. Under the Evidence Act and common law, business records are included as one of the statutory exceptions to the hearsay rule against admissibility of hearsay. Pfizer argued that they could not be as they stated opinions instead of facts, but the FC disagreed. Though certain parts of the documents straddled the divide between fact and opinion, it was held that using a document for the truth of its contents does not mean the facts contained will be presumed to be true. Rather, the documents will constitute admissible evidence that may be used, along with other evidence, to prove those facts. As such, the motion was allowed.

Analysis

The 154 Appeal

On appeal, with respect to the finding of invalidity on account of overbreadth, Seedlings argued first that overbreadth is not a proper ground for invalidity and second, that even if it is, the FC erred in applying it to the facts at hand [47].

Overbreadth

In advancing the notion that there is no statutory basis for overbreadth as a ground of invalidity, Seedlings argued that the FC’s finding of overbreadth represents an “improper re-emergence of the promise doctrine” [49]. The promise doctrine, which was invalidated by the Supreme Court of Canada (the “SCC”) in AstraZeneca Canada Inc. v. Apotex Inc. in 2017, held that a patent was invalid for lack of utility if the specification promised more than it could provide. The SCC had rejected the doctrine as being based on an interpretation of the utility requirement that was inconsistent with the Act.

In response, the FCA held that overbreadth is indeed a proper ground of invalidity. Referencing his recent commentary in Western Oilfield Equipment Rentals Ltd. v. M-I LLC, Justice Locke explained that a patent claim can fail for overbreadth if it is broader than the invention disclosed in the specification or than the invention made by the inventor [50]. Locke JA further confirmed that the doctrine is supported by a combination of subsections 27(3) and 27(4) of the Act [51].

With respect to the trial judge’s reasons for the finding of overbreadth, the FCA disagreed with two out of three of them. First, Locke JA clarified that a patent may describe preferred or exemplary embodiments but is not expected to describe all possible embodiments of the invention to be compliant with the Act [58]. Second, Locke JA explained that it was incorrect for the FC to suggest that a patent cannot describe an invention without claiming it, i.e., that any original invention must be claimed [59].

Ultimately, the FCA agreed with the second reason provided by the FC to support its conclusion of overbreadth, the reason being that several elements were omitted from the claims that were essential to the invention [60]. Because there was no palpable and overriding error, the FCA refused to interfere with the FC’s finding of overbreadth.

Remedies

Though the conclusions on invalidity made it unnecessary to consider remedies, Locke JA took the opportunity to address comments made by the trial judge on the question of election of an accounting of profits as a remedy for patent infringement. It was held that the FC failed to properly provide support for the broad principle that a patentee that makes profits by selling licenses to its patent, rather than practising the patent, should not be entitled to elect an accounting of profits [78]. Locke JA sympathized with inventors who want to focus their talent on inventing rather than production and marketing, suggesting that the principle being advanced by the FC would hurt business efficiency. Finally, it was concluded that an accounting of profits is not aimed at compensating the patentee for its losses, instead “it is aimed at denying the infringer the fruits of its wrongful activities” [80, citing Nova Chemical Corporation v. Dow Chemicals Company].

The 155 Appeal

In this very brief judgment, the FCA dismissed the appeal and declared it moot in view of the 154 Appeal.

Commentary

Though several post-AstraZeneca decisions saw the courts refuse to accept promise-like arguments to satisfy the utility requirement, in others these very same arguments have been couched under the doctrine of overbreadth. As Seedlings argued at trial, there is cause for concern when claims to an invention are invalidated solely because the claim is broader than the invention, while the invention is nonetheless new, useful, non-obvious and sufficiently disclosed.

However, as articulated by Locke JA, there is a sound basis for the overbreadth doctrine in the Act and in patent law in general. A patent cannot claim more than it describes as this would give the patentee a greater monopoly than they bargained for. What will be crucial to avoiding the potential misuse of the doctrine will be the Court’s continued commentary on how such an allegation of invalidity ought to be approached.

For more information on patent validity, please contact a professional at PCK Intellectual Property.

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