Monsanto v Schmeiser Does Not Indicate SCC Departure From Existing Precedents: But-For Causation Still Required for Contributory Infringement

In Nycomed Canada Inc. v Teva Canada Limited 2012 FCA 195 (Noël, JA), the Federal Court of Appeal (FCA) considered whether the Federal Court erred in rejecting Nycomed’s counterclaim for induced infringement. The FCA upheld the lower court’s decision affirming that but-for causation must be established in order to successfully claim contributory infringement.

In addition, the FCA considered whether the SCC decision in Monsanto Canada Inc v Schmeiser indicated that the SCC intended to move away from the Inducement Test set out more recently in Weatherford Canada Ltd v Corlac Inc.  On this issue, the FCA held that the SCC did not intend to move away from established precedents on contributory infringement.

Nycomed’s ‘748 patent claims a combination of (1) a benzimidazole derivative that has an inhibitory effect on gastric acid secretion with (2) a heliobacter inhibiting antimicrobial agent. Apotex and Novopharm sell generic pantoprazole that falls within the scope of element (1) of the ‘748 patent. Since Apotex and Novopharm do not sell a heliobacter inhibiting anti-microbial agent in combination with pantoprazole, they are not directly infringing the‘748 patent. However, pharmacists and physicians do sell these agents in combination with generic pantoprazole.  Thus, Nycomed sought to claim that the generics’ sale of pantoprazole to physicians and pharmacists constituted contributory infringement of the ‘748 patent.

The argument put forward by Nycomed was that pharmacists and physicians who dispense or prescribe pantoprazole together with a heliobacter inhibiting anti-microbial agent are the direct infringers and the generics have “…contributed to the infringing activities of these third parties through its product monograph, website and its marketing strategies to physicians and pharmacists”.

The general rule for infringement in Canadian common law (set out in Beloit Canada Ltd v Valmet O) states that selling an article which does not itself infringe a patent does not constitute infringement unless  the vendor knowingly and for his own ends and benefit, induces or procures the purchaser to infringe the patent.

The test for inducement requires that:

(1) The act of infringement must have been completed by the direct infringer;

(2) The completion of the acts of infringement must be influenced by the acts of the alleged inducer to the point that, without the influence, direct infringement would not take place and;

(3) The inducer must know that this influence will result in the completion of the act of infringement.

The sale of pantoprazole in combination with a particular type of heliobacter inhibiting antimicrobial agent is a common treatment for a particular class of gastrointestinal disorders.  Therefore, it was very unlikely that Nycomed would be able to establish that physicians would not have prescribed pantoprazole together with an anti-microbial agent but for the acts of the generic company. Nycomed attempted to circumvent the second requirement of the test by alleging that the generics were liable for contributory infringement “distinct from the ‘but for’ allegation of inducement”. This was soundly rejected by the trial court and upheld by the FCA.  The court ruled that but-for causation must be established in order to demonstrate inducement.

Nycomed’s further argument that the SCC decision in Monsanto Canada Inc v Schmeiser signaled a fundamental departure from the well established Inducement Test was also soundly rejected by both the trial court and the FCA.

Beatrice Sze is a JD Candidate at Osgoode Hall Law School.