2010 FC, 2010 FC 1265

Federal Court Cour fédérale Date: 20101222 Docket: T-1272-97 Citation: 2010 FC 1265 BETWEEN: MERCK & CO. INC. and MERCK FROSST CANADA LTD. Plaintiffs/ Defendants by Counterclaim and APOTEX INC. and APOTEX FERMENTATION INC. Defendants/ Plaintiffs by Counterclaim PUBLIC REASONS FOR JUDGMENT (Confidential Reasons for Judgment issued on December 9, 2010) SNIDER J. I. Introduction A.

Overview [ 1 ] The subject of this litigation is the drug lovastatin, sold in Canada under the trade name MEVACOR since 1988 by Merck Frosst Canada Inc. (or its successor, Merck Frosst Canada Ltd. (Merck Frosst), one of the Plaintiffs in this action). MEVACOR was the first commercialized “statin” sold in the Canadian market and is used for the treatment of elevated blood cholesterol. Until January 31, 2001, when the patent expired, MEVACOR was the subject of Canadian Patent No. 1,161,380 ('380 Patent) issued January 31, 1984 to Merck & Co., Inc. (Merck & Co.), the other Plaintiff in this action.

Stated briefly, the '380 Patent is a product-by-process patent to lovastatin when made with a micro-organism known as Aspergillus terreus (also referred to as A. terreus ). Merck Frosst sells MEVACOR in Canada under licence from Merck & Co. In these reasons, I will refer to Merck Frosst and Merck & Co., collectively, as “Merck” or the “Plaintiffs”.

[ 2 ] In March 1997, Apotex Inc., one of the Defendants in this action, began selling its brand of lovastatin tablets in Canada (Apo-lovastatin). The active pharmaceutical ingredient (API) that remains in dispute in this litigation was made either by Apotex Fermentation Inc. (AFI), the other Defendant in this action, in Winnipeg, Manitoba, or by Qingyuan Blue Treasure Pharmaceuticals Co. Ltd. (Blue Treasure), in China.

In these reasons, I will refer to Apotex Inc. and AFI, collectively, as “Apotex” or the “Defendants”. [ 3 ] Merck claims that the Defendants infringed the '380 Patent: • through the use of infringing API that was made in China and shipped from Blue Treasure to AFI; • through the “salting” of non-infringing lovastatin with infringing lovastatin; • through the manufacturing of one batch of infringing API (batch CR0157) in Winnipeg by AFI; and • with some other small amounts of infringing product made in Winnipeg by AFI. [ 4 ] The Defendants claim that there has been no infringement of the '380 Patent and that, in any event, the '380 Patent is invalid.

Further, they argue that Merck & Co. has no standing to bring this action, having assigned all of its interest in the '380 Patent to an affiliate, Merck and Company, Incorporated (MACI). [ 5 ] The application leading to the '380 Patent was filed in Canada on June 11, 1980. According to s. 78.1-78.2 of the present Patent Act , R.S.C. 1985, c. P-4, as amended, patent applications filed before October 1, 1989, are to be dealt with under the provisions of the Patent Act as they read immediately before that date.

Accordingly, references in these reasons to the Patent Act [referred to as the Patent Act or the Act ], unless specifically noted otherwise, will be to the Act as it stood immediately prior to October 1, 1989. B.

Summary of issues and conclusions [ 6 ] Very briefly, although there are a myriad of subsidiary issues, the key questions to be addressed in this proceeding are as follows: 1. Does Merck & Co. have standing to bring this action? 2. Have the Defendants infringed the '380 Patent? 3. Is the '380 Patent valid? [ 7 ] As explained in these reasons, I have concluded that: 1. Merck & Co. has standing to bring this action; 2. The '380 Patent was infringed; and 3. The '380 Patent is valid. [ 8 ] As a result, the claims of the Plaintiffs will be allowed, to the extent described below, and the counterclaims of the

Defendants will be dismissed. [ 9 ] Finally, by way of introduction, I note that this trial is subject to a bifurcation order dated November 14, 2003 (Bifurcation Order). Accordingly, the question of damages will be considered in a subsequent proceeding. C. Background to this litigation [ 10 ] For almost ten years after its introduction into the Canadian market, Merck enjoyed its patent for MEVACOR without challenge.

In 1993, Apotex Inc. tried to enter the market with a generic version of lovastatin and, to that end, applied to the Minister of Health for a Notice of Compliance (NOC) pursuant to the relevant provisions of the Patented Medicines (Notice of Compliance) Regulations , SOR/93-133, as amended by SOR/98-166 [ PMNOC Regulations or the Regulations ].

Apotex alleged that it would not infringe the '380 Patent , as it would not be using a process to produce lovastatin that would fall within the scope of the p atent . [ 11 ] As permitted by the Regulations , in April 1993, Merck filed an application with this Court to prohibit the Minister from issuing an NOC to Apotex Inc.

A key feature of the PMNOC Regulations is the imposition of a statutory stay upon the filing of an application for prohibition until a determination can be made as to whether the “second person” – in this case, Apotex Inc. – was justified in its claims that its generic drug would not infringe any existing patents. Section 6(1) of the Regulations , as they were at that time, automatically prohibited the Minister from issuing an NOC to Apotex Inc. for up to 30 months. [ 12 ] The statutory stay expired on December 1, 1996, without any hearing before the Court on the merits of the prohibition application.

Merck Frosst Canada Inc. sought an extension of the stay. In an oral judgment dated March 26, 1997, Justice Rothstein (then a judge with the Federal Court, Trial Division) refused to extend the time period or to issue a prohibition order. An NOC was issued to Apotex Inc. on March 27, 1997. [ 13 ] Following the issuance of the NOC and a series of Court challenges, two actions were commenced: 1. Merck commenced this action against Apotex Inc. and Apotex Fermentation Inc. (AFI) for patent infringement (Court File T-1272-97). The statement of claim was filed on June 12, 1997. 2.

By statement of claim filed June 29, 2001, Apotex Inc. seeks compensation from Merck under s. 8 of the PMNOC Regulations (Court File No. T-1169-01). [ 14 ] In 2001, Apotex Inc. commenced a third party claim against Biogal Pharmaceutical Works Ltd. (Biogal) in Court File No.T- 1272-97. The subject matter of the third party claim was 300 kg of bulk lovastatin acquired by Apotex Inc. from Biogal pursuant to a Supply Agreement.

In its third party claim, Apotex Inc. claimed that, in the event that the '380 Patent is held to be valid and infringed, Biogal was liable for any relief that may have been awarded against Apotex Inc. Biogal participated in the T-1272-97 litigation until a settlement was reached among the parties to this litigation.

By Court Order dated May 28, 2010, the Plaintiffs’ claims against Apotex Inc. and AFI in the Amended Fresh as Amended Statement of Claim and referenced in paragraphs 36 and 67-73 therein relating to lovastatin supplied by Biogal to Apotex Inc. were dismissed. [ 15 ] Both actions were heard together in a trial that commenced on February 1, 2010. These Reasons deal only with the issues in Court File No. T-1272-97 – Merck’s claim of infringement and Apotex’s counterclaim of patent invalidity. Separate Reasons for Judgment and Judgment have been issued contemporaneously with these Reasons in Court File No.

T-1169-01. [ 16 ] During the 35-day evidentiary phase of this trial, many witnesses appeared, both as expert and fact witnesses. In Appendix A, I have set out a brief overview of the expert and fact witnesses who appeared during the trial and the areas to which they testified. For the expert witnesses, I have set out a very short description of their education and experience in the areas for which this Court found each of them to be qualified. More detailed references to the witnesses’ evidence and testimony are contained in the appropriate sections of these reasons. II. Table of Contents

[ 17 ] To assist the reader, the following sets out a Table of Contents for these Reasons with paragraph numbers for each heading I. Introduction ...................................................................................... 1 – 16 A. Overview .................................................................................. 1 - 5 B.

Summary of issues and conclusions ......................................... 6 - 9 C. Background to this litigation ............................................... 10 - 16 II. Table of Contents ................................................................................... 17 III. Background...................................................................................... 18 - 39 A. The '380 Patent and Statins.................................................. 18 - 24 B. History of AFI/Blue Treasure Production............................. 25 - 39 IV.

Standing............................................................................................ 40 - 56 V. Claims Construction ...................................................................... 57 - 130 A. Principles of Claims Construction ....................................... 57 - 62 B. The hypothetical skilled person............................................ 63 - 67 C. The Patent Specification....................................................... 68 - 81 D. The claims in issue................................................................ 82 - 87 E.

The meaning of “a microfungus of genus Aspergillus in Claim 1 .......................................................... 88 - 99 F. The meaning of “isolating the products”......................... 100 - 109 G. Inclusion of non-producing strains................................... 110 - 121 H. The promised use of the '380 Patent................................ 122 - 126 I.

Summary on Claims Construction.................................... 127 - 130 VI. Infringement – Background......................................................... 131 - 188 A. Introduction...................................................................... 131 - 133 B. Burden............................................................................... 134 - 186 C.

Summary of Merck’s case on infringement...................... 187 - 188 VII. Infringement – the Circumstantial Case .................................... 189 - 360 A. Blue Treasure “Salting”................................................... 189 - 208 B. Infringement by Blue Treasure from March 1998 ...................................................................... 209 - 335

(1) Batch Records........................................................ 211 - 249

(2) P2000.................................................................... 250 - 259

(3) Fermentation Duration............................................ 260 - 270

(4) Increased Titres ..................................................... 271 - 294

(5) Motivation, Means and Opportunity........................ 295 - 320 (

a) Motivation................................................ 296 - 310

(

b) Means ....................................................... 311 - 316 (

c) Opportunity ............................................... 317 - 320

(6) Blue Treasure Conduct........................................... 321 - 335 C. Conclusion on Blue Treasure Circumstantial Evidence .. 336 - 342 D. AFI Batch CRO 157.......................................................... 343 - 360 VIII. Infringement – the DNA Evidence ............................................. 361 - 463 A. Introduction .................................................................. 361 - 369 B. Nexus between the samples tested and the allegedly infringing lovastatin ....................................................... 370 - 377 C.

Reproducibility of the testing in the Davies lab .................................................................. 378 - 390 D. Failure of Dr. Davies to find C. fuckelii DNA in the tablets from Batch CR0157 .............................................. 391 - 395 E. DNA evidence and the Apotex Experts............................ 396 - 422

(1) What is Ancient DNA?........................................... 402 - 404

(2) Is DNA derived from a pharmaceutical product degraded or fragmented?........................................ 405 - 410

(3) Can one compare how DNA derived from a pharmaceutical product is fragmented to how DNA from “ancient DNA” is degraded? ................. 411 - 414

(4) Are the opinions of the Defendants’ experts relevant to fragmented DNA .................................. 415 - 422 F. Contamination ................................................................. 423 - 444

(1) Dr. Davies............................................................. 425 – 430

(2) Dr. Taylor.............................................................. 431 - 439

(3) Dr. Gilbert.............................................................. 440 - 444 G. Other criticisms of Dr. Davies’s opinion ......................... 445 - 463

(1) Lack of knowledge................................................. 449 - 451

(2) Incomplete Report & Lack of Disclosure.............................................................. 452 - 457

(3) Unexpected results ................................................ 458 - 463 IX. Infringement – Conclusion........................................................... 464 - 466 X. Validity ........................................................................................ 467 - 609 A. Introduction...................................................................... 467 - 468 B. Overbreadth...................................................................... 469 - 475 C. Utility ............................................................................... 476 - 532

(1) General Principles .................................................. 476 - 485

(2) The '380 Patent...................................................... 486 - 488

(3) Lack of Utility......................................................... 489 - 495

(4) Sound Prediction.................................................... 496 - 532 (

a) The Factual Basis..................................... 498 - 511 (

b) Line of Reasoning..................................... 512 - 519 (

c) Disclosure ................................................ 520 - 532 D. First Inventorship/Missed Conflict................................... 533 - 609

(1) Introduction ........................................................... 533 - 534

(2) Legal Principles...................................................... 535 - 540

(3) Was there a missed conflict..................................... 541 - 558

(4) Did the Endo application disclose the invention of the '380 Patent? ................................................. 559 - 562

(5) Red Yeast Rice/Anticipation................................... 563 - 609 (

a) Principles of Anticipation......................... 563 - 569 (

b) Background on Red Yeast Rice................. 570 - 571 (

c) Legal Consequences of lovastatin in Red Yeast Rice .......................................... 572 - 583 (

d) Evidence of lovastatin in Red Yeast Rice prior to the priority date .................. 584 - 598 (

e) Disclosure of lovastatin in Red Yeast Rice .......................................................... 599 - 609 XI. Conclusion.................................................................................... 610 - 642 A. Damages or Profits........................................................... 610 - 624 B. Exemptions from Liability................................................ 625 - 637 C. Conclusion ....................................................................... 638 - 642 Appendix A – List of Witnesses..............................................................

A1 – A11 Appendix B – Claims 1 to 8 and 13 to 15 of the '3 80 Patent ........................................................................ B1 – B4 III. Background A. The '380 Patent and Statins [ 18 ] Lovastatin, as made by the process of the '380 Patent, is an example of a medicinally-valuable drug that is produced by a process of fermentation. In very simple terms, the laboratory begins with a micro-organism - in this case, Aspergillus terreus – and, through increasingly larger fermentations carried out in very controlled settings, manufactures the API of interest.

[ 19 ] The '380 Patent relates to “hypocholesteremic products from the cultivation of a microfungus of the species Aspergillus .” Dr. Antonio Gotto provided very helpful background information on the role of “hypocholesteremic” medications, such as lovastatin, in the treatment of cardiovascular disease. In addition to being qualified because of his stature as a professor of medicine, Dr.

Gotto’s experience as a treating physician during the 1970s and 1980s was directly relevant to the matters before me. [ 20 ] Atherosclerosis is a type of cardiovascular disease that occurs when cholesterol and other substances build up in the walls of arterial blood vessels to form plaque. Over time, the build-up of plaque thickens and hardens the arterial walls restricting the flow of blood from the heart. Heart attacks and strokes may follow. [ 21 ] The build-up of plaque is promoted by low density lipoproteins (referred to as LDL or “bad” cholesterol). According to Dr.

Gotto, the relationship between reducing “bad” cholesterol and reducing the risk of cardiovascular disease has been known for over 20 years. Thus, a primary goal of medicine is to lower LDL cholesterol. The class of drugs known as “statins” are of great assistance in achieving this goal. [ 22 ] In Dr. Gotto’s words (Gotto Expert Report, Exhibit 2, paras. 24, 38): It was only with the discovery of statins – starting with lovastatin (MEVACOR®) in the late 1970s – that treatment of elevated cholesterol became much more effective. . . .

The single most significant discovery to date for the treatment of cholesterol was the discovery of lovastatin in the late 1970s. [ 23 ] Dr. Gotto described how statins work to lower cholesterol. Statins reduce the production of cholesterol by the liver. Specifically, statins block the liver enzyme known as HMG-CoA reductase (hydroxyl-methylglutaryl-coenzyme A reductase); hence, statins are known as HMG-CoA reductase inhibitors. Dr. Gotto made the general comment that “statins changed medical practice” (Gotto Expert Report, Exhibit 2, para. 50).

No one disagreed with this opinion. [ 24 ] Lovastatin, as manufactured and sold by Merck (or its predecessors in interest) under the trade name MEVACOR, was the first commercially-available statin. B. History of AFI/Blue Treasure Production [ 25 ] An important part of the story for this litigation is how Apotex Inc. became interested in lovastatin and how Apotex Inc., AFI and the Blue Treasure Joint Venture became involved. [ 26 ] Dr. Bernard Sherman is currently the Chairman and Chief Executive Officer of Apotex Inc., a company that he founded in 1973. During his oral testimony, Dr.

Sherman described Apotex Inc. in the following terms: It's a pharmaceutical manufacturer, the largest in Canada today. We produce primarily generic pharmaceutical products, but also some innovative products. We have huge dosage form manufacturing facilities. We are vertically integrated. We have chemical plants. We spend enormously on research and development, the largest in Canada, and we have divisions in many countries around the world and factories in many countries, including chemical plants. [ 27 ] Apotex Inc. recognized the significance of the lovastatin market. Dr.

Sherman described lovastatin, in 1993, as “one of the biggest selling drugs in the country at the time, close to $100 million a year”.

[ 28 ] Of particular relevance to this litigation, Dr. Sherman told the Court how his company’s version of lovastatin became entangled with a suddenly-changed regulatory regime in 1993. Until 1993, it was possible for a generic company to obtain a compulsory licence to allow it to produce a generic equivalent of a patented medicine. The original intent of Apotex Inc. was to obtain a compulsory licence to use Aspergillus terreus to make lovastatin. According to Dr. Sherman, in 1993, the licence regime and licences issued under it were cancelled. They were replaced with the PMNOC Regulations outlined by Dr.

Sherman as follows: In 1993, not only were the licences – the licence regime eliminated, including retroactive cancellation of some licences – one applicable to this case – but, in addition to that, a new regime was instituted, called the Patented Medicines (Notice of Compliance) Regulations , pursuant to which patentees or first persons, persons who had approval for the original brand, could list patents which they purported were relevant to a product; and, if they listed the patent, then a generic applicant, a second person, cannot get federal approval until the requirements of those regulations are satisfied, which means that the second person has to serve a notice of allegation in which it is alleged that the patent will not be infringed or is invalid.

Then, within 45 days, if the patentee or first person institutes a prohibition application, which almost always happens, there is a delay in federal approval until that matter is resolved, which can take a very long time. [ 29 ] A relationship of interest to this case is that of Apotex Inc. and AFI. In the mid-1980s, Apotex Inc. contracted with ABI Biotechnology Inc. (ABI) in Winnipeg to develop and manufacture certain fermented products. Ultimately, the assets of ABI were bought by Apotex Inc. and the company was renamed as AFI.

Through AFI, Apotex Inc. gained the capacity to manufacture products using fermentation processes. AFI added to the vertical integration of the Apotex family of business entities. [ 30 ] AFI was to be the source of the API lovastatin. As described in detail by Dr. Lasure, in her Expert Report (Exhibit 48), and by Dr.

David Cox, during his testimony, the following steps were taken by AFI: • AFI acquired Merck's deposited strains of Aspergillus terreus from the American Tissue Culture Collection (ATCC), including a strain designated ATCC 20542. • ATCC 20542 was then mutated by UV mutagenesis twice to create a mutant strain of ATCC 20542. • AFI designated the strain as BN-2-70 and the process for manufacturing lovastatin using this strain as AFI-1. • Between 1991 and 1995, AFI developed a commercial scale fermentation process for making lovastatin using AFI-1 – that is, using Aspergillus terreus . [ 31 ] In 1992, Dr.

Sherman testified that, anticipating the intent of the government, Apotex began to look for a non-infringing process. Apotex “had to find a microbe that would produce lovastatin that was not Aspergillus terreus ”. In her Expert Report, Dr. Lasure summarized the context and the results of this search: • On June 25, 1988, the Journal of Antibiotics published an

article entitled "The Synthesis of Compactin (ML-236B) and Monacolin K in fungi" written by Dr. Akira Endo et al. Dr. Endo reported on fungal strains capable of producing Monacolin K (known now to be lovastatin), including Phoma species M4452. • In June 1992, a sample of Phoma Sp. M4452 was sent to AFI by Dr. Endo. • For the next six months or so, AFI took steps in its laboratories to confirm and develop the production of lovastatin from the Endo sample.

The process was initially referred to as Phoma #4; later designated as “AFI-4”. • By May 1993, a sample of the AFI-4 product was confirmed to be Coniothyrium fuckelii (also referred to as C. fuckelli ). • Apotex Inc. filed a patent for the AFI-4 process – a process for making lovastatin using Coniothyrium fuckelii – that subsequently issued as United States Patent No. 5,409,820 on April 25, 1995.

[ 32 ] As described by a number of witnesses, including Dr. Cox and Ms. Lori Christofalos, AFI’s production of AFI-4 lovastatin and shipments to Apotex Inc. can be divided into three phases: 1. Phase 1 occurred between June 1996 and August 1997, during which all production was done solely at AFI facilities in Winnipeg. The finished API was shipped to Apotex Inc., beginning with the shipment of batch CR0157 on December 2, 1996. 2. In Phase 2, Blue Treasure (discussed below) manufactured approximately 70 batches of technical-grade lovastatin.

The product was then shipped to AFI for processing into API and shipment to Apotex Inc. Phase 2 lasted from about mid-1997 to January 1998. 3. Phase 3 consisted of approximately 294 batches of API-grade lovastatin manufactured entirely at Blue Treasure after March 1998.The product was sent to AFI, where “some testing” was carried out, and then shipped to Apotex Inc. This phase continued until October 1999, with the last shipment received at AFI on March 2, 2000. [ 33 ] The joint venture company known as Qingyuan Blue Treasure Pharmaceuticals Co.

Ltd. (Blue Treasure or Blue Treasure Joint Venture) is a critical component of this litigation. Dr. David Cox, President and Chief Executive Officer of AFI from September 1994 to September 1997, provided a clear and helpful background about this joint venture. Dr. Cox was on the Board of Directors of Blue Treasure during the same period. [ 34 ] Blue Treasure was formed pursuant to a Joint Venture Contract dated January 25, 1994 among Qingyuan New North River Pharmaceutical Co. Ltd. (New North River), Zuhai Special Economic Zone Lizhu Pharmaceutical Group Co.

Ltd., Sichuan Industrial Institute of Antibiotics, AFI and BIOTECS. AFI held a 42.5% share of the Blue Treasure Joint Venture.

As set out in clause 4.01 of the Joint Venture Contract, the purpose of the Blue Treasure Joint Venture was as follows: The purpose of the Joint Venture is to renovate and operate the Factory, to purchase or otherwise obtain all necessary raw materials and equipment required for the production of the Products, and to produce, market, distribute and sell Products at a profit to customers both in China and abroad. [ 35 ] In 1994, New North River was already an operational pharmaceutical facility with capacity for carrying out fermentation processes.

Under the Joint Venture Contract, New North River contributed a portion of its facilities located on its property to the Blue Treasure Joint Venture. [ 36 ] As defined in the Joint Venture Contract, “Products” meant “the drug Lovastatin as Bulk Products and Finished Products”. Dr. Cox stated that the Blue Treasure Joint Venture “was set up to produce and distribute and sell Lovastatin in the Chinese domestic market”. AFI’s main contribution to the Blue Treasure Joint Venture was the organism that produced lovastatin. Dr.

Sherman told the Court that the decision to move the production of lovastatin to Blue Treasure was made for the following reasons: [Blue Treasure] had capacity there, and we wanted to move the production for Canada out of Winnipeg, both to bring costs down and to free up Winnipeg to go on for other things that would be needed later. [ 37 ] In the spring of 1995, AFI transferred to Blue Treasure the information and knowledge it had developed to manufacture lovastatin made from Aspergillus terreus .

Among the things transferred to Blue Treasure were: a document setting out the process for producing lovastatin from Aspergillus terreus , entitled "Scale-up Process to 15000L Fermenter"; and, 25 vials of strain BN-2-70 from seed bank A18-378, and 5 rice cultures from batch #CF0057 (shipped to Blue Treasure on May 15, 1995).

Blue Treasure began producing lovastatin, using the AFI-1 process, in 1996. [ 38 ] In about April 1997, AFI determined that it would transfer the AFI-4 technology to Blue Treasure together with a guarantee that AFI would purchase the lovastatin from Blue Treasure, provided that the lovastatin was all made by the AFI-4 process and that “the Blue Treasure facility be exclusively dedicated to AFI-4”. The terms of this arrangement were set out in a letter agreement dated April 16, 1997 between AFI and Blue Treasure. Dr. Cox described the impact of the AFI-4 transfer as “transformative in a positive way”.

The transfer of AFI-4 to Blue Treasure was made with very explicit instructions that the lovastatin purchased by Apotex was to be produced exclusively with the AFI-4 Coniothyrium fuckelii strain, with no possibility of contamination from Aspergillus terreus (see, for example, letter dated September 12, 1997 from Mr. Fowler to Mr. Zhou). Problems quickly arose. These problems are discussed later in

Section VII of these reasons.

[ 39 ] From 1997 to 1999, AFI imported lovastatin from Blue Treasure in accordance with the terms of the Blue Treasure Joint Venture. The lovastatin API was then sold to Apotex Inc. IV. Standing [ 40 ] The first issued raised by Apotex is the standing of Merck & Co. to bring this action. [ 41 ] The authority of a party to claim damages for patent infringement is found in s. 55(1) of the Patent Act . 55.

(1) Any person who infringes a patent is liable to the patentee and to all persons claiming under him for all damages sustained by the patentee or by any person, by reason of the infringement. 55.

(1) Quiconque viole un brevet responsable, envers le breveté et envers toute personne se réclamant du breveté, des tous dommages-intérêts que cette violation a fait subir au breveté ou à cette autre personne. [ 42 ] The term “patentee” is defined in s. 2 of the Patent Act to mean “the person for the time being entitled to the benefit of a patent”. [ 43 ] The '380 Patent was granted to Merck & Co. In 1985, Merck & Co. entered into a License Agreement with Merck Frosst (the 1985 License Agreement), granting an non-exclusive licence to Merck Frosst.

That Agreement was amended, effective January 1, 1989, to add the '380 Patent.

Subsequently, as of January 1, 1992, Merck & Co. entered into an agreement (the MACI Agreement) with Merck and Company, Incorporated (MACI) pursuant to which Merck & Co., as Licensor, granted to MACI, as Licensee: A permanent and exclusive royalty-free license for the Intellectual Property which Licensor owns or hereinafter acquires, but for any outstanding licenses for the Intellectual Property which already granted pursuant to the License Agreement, dated January 1, 1985, and amendments thereto between Merck & Co., Inc. and Merck Frosst Canada Inc. [ 44 ] Apotex does not dispute Merck Frosst Canada Ltd.’s standing in this action, as the successor in interest to Merck Frosst Canada Inc.

However, Apotex submits that Merck & Co. has no standing to bring this action, having assigned all of its interest in the '380 Patent to MACI pursuant to the MACI Agreement. Apotex asserts that, as of November 1992, MACI had the “full and unrestricted benefit of the ‘380 Patent”. Merck & Co. lost all benefit of the patent and, as a result, the right to damages under s. 55 (1) of the Patent Act .

Apotex argues that, although the agreement is entitled “License Agreement”, a review of the words of the agreement demonstrates that the intent of the parties to the MACI Agreement was to convey the entire right, title and interest in the '380 Patent to MACI. [ 45 ] Apotex submits that agreements which take the form of a licence, but nevertheless convey all of the substantive rights in a patent, have consistently been held to constitute an effective assignment or transfer of that patent.

In support of this argument, Apotex relies on a line of jurisprudence of courts in the United States and the United Kingdom ( Merck & Co., Inc. v. Francis R. Smith , 261 F.2d 162 at 164 (3 rd Cir. 1958); Vaupel Textilmaschinen KG v. Meccanica Euro Italia SPA , 944 F.2d 870 , 874 (Fed. Cir. 1991); Prima Tek II, L.L.C. v. A-Roo Co. , 222 F.3d 1372 , 1377-78 (Fed. Cir. 2000); Guyot v. Thompson [1894] R.P.C. 541 at 554 (C.A.)[ Guyot ]). [ 46 ] I do not find the authorities relied on by Apotex to be of any assistance.

Except in the case of Guyot , above, a decision of the High Court of Justice – Chancery Division, the Courts in those cases were considering the effect of agreements in the context of U.S. patent law. I do not see how they could guide this Court in determining the meaning of the terms of and, if necessary, the intent of the parties to the MACI Agreement. I did not have the benefit of an expert in U.S. law opining as to whether the MACI Agreement would constitute a transfer of all of the rights of the patent to MACI under applicable U.S. law.

Moreover, the facts in Guyot , where an exclusive assignee was attempting to enforce the terms of an Indenture, are simply too remote from the question before me. [ 47 ] Rather, I would look at this issue in the context of the Canadian law of contracts. As I understand the state of the Canadian law of contracts, the express language of the parties to a contract is the core of their contractual obligations. Where the words of a contract are clear and unambiguous, a court need not look beyond those clear words to determine its intent and effect.

[ 48 ] Apotex was unable to point me to a single Canadian case that supports its position. Nevertheless, I would agree that the title of the License Agreement would not be determinative if there is clear and persuasive evidence that Merck & Co. intended to convey all of its rights in the '380 Patent to MACI, retaining nothing to itself. Whether this is so or not will depend on an examination of the words of the MACI Agreement and the facts and circumstances surrounding the MACI Agreement. [ 49 ] In this case, the express language of clause 2 of the MACI Agreement uses the word “license”.

On its face, the MACI Agreement only grants a “license”. The Supreme Court of Canada in Domco Industries Ltd., v. Armstrong Cork Canada Ltd. , 1982 CanLII 185 (SCC) , [1982] 1 S.C.R. 907 at p.912, 66 C.P.R. (2d) 46 , adopted the comments of Fry L.J. at p. 470, in Heap v. Hartley (1889), 42 Ch. D. 461 : An exclusive license is only a license in one sense; that is to say, the true nature of an exclusive license is this. It is leave to do a thing, and a contract not to give leave to anybody else to do the same thing.

But it confers like any other license, no interest or property in the thing . [Emphasis added.] [ 50 ] I also note the language of certain clauses in the MACI Agreement that refer to rights retained by Merck & Co. For example, clause 3 provides the Licensor with the rights to inspect the Licensee’s facilities. Under clause 5.2, the Licensee is to supply the Licensor with a detailed description of any disclosure of “licensed know-how” to any governmental authority.

In my view, retention of rights such as these is inconsistent with an intention to transfer all rights under the patent. [ 51 ] In support of its position, Apotex points to a recital to the MACI Agreement: WHEREAS, the Licensor desires to grant the Licensee a permanent and exclusive license with respect to its remaining right, title and interest in and to the rights which it has acquired with respect to such intellectual property as a contribution to the capital of the Licensee. [Emphasis added.] Apotex relies on the Supreme Court of Canada decision in Dukart v.

Surrey (District) , 1978 CanLII 214 (SCC) , [1978] 2 S.C.R 1039 at p.1052-53, 86 D.L.R. (3d) 609 [ Dukart cited to S.C.R] as support for its submission that, where the words of a recital manifest a clear intention, the Courts have inferred that the parties intended that these words be given effect. [ 52 ] The case of Dukart does not assist Apotex. Dukart involved the grant of an “easement” and the question of the true intentions of the parties. In that case, the body of the agreement contained no language with respect to the extent of the rights granted under the agreement.

The recital clause was used by the Supreme Court to provide the necessary meaning to the agreement. [ 53 ] The case before me is different in that provisions in the body of the MACI Agreement speak to the intent of the agreement and the scope of the “transfer” from Merck & Co. to MACI. The use of a recital or

preamble as an interpretative aid must always be approached with caution. As pointed out by Justice Abella (as she then was) in Lay v. Lay (2000), 2000 CanLII 5669 (ON CA) , 47 O.R. (3d) 779 , 184 D.L.R. (4 th ) 652 (Ont. C.A.) at paragraph 12 , leave to appeal to SCC refused, [2000] S.C.C.A. No. 369 (QL) , 264 N.R. 398 (note) : There is no doubt that an introduction or a

preamble can provide interpretative assistance, but I see no basis for accepting the novel proposition that its terms can triumph over those in the body of the contract. [ 54 ] In my view, the words of the MACI Agreement establish the creation of a licence and not a conveyance of all rights in the '380 Patent. The use of the word “remaining” in the recital does not “triumph over” the words of the agreement.

This is sufficient to defeat the argument of Apotex. [ 55 ] However, even if I accept that there may be ambiguity in the MACI Agreement, I am satisfied that the parties to the MACI Agreement did not intend to convey the entire right, title and interest in the '380 Patent. One indication of the intent of the parties to an agreement is the behaviour of the parties. If the MACI Agreement is not clear on its face, it is of assistance to examine the behaviour of the parties after the execution of the agreement.

Was the behaviour of Merck & Co., from November 1992, consistent with a company who had given up its entire right, title, estate and interest in the '380 Patent? Clearly, the answer is “no”. If there had been such intent, why would Merck & Co. commence and pursue this litigation for 13 years in its own name? Further, why would Merck & Co. remain as the named patentee on the '380 Patent?

[ 56 ] I am satisfied that the MACI Agreement did not operate as a conveyance of the entire right, title and interest of Merck & Co. to MACI. Merck & Co. has standing to bring this action. V. Claims Construction A. Principles of Claims Construction [ 57 ] The first step in a patent suit is to construe the claims, in accordance with principles that are well-established in the jurisprudence (see, for example, Whirlpool Corp. v. Camco Inc ., 2000 SCC 67 , [2000] 2 S.C.R. 1067 [ Whirlpool ] ).

This jurisprudence teaches that claims are to be interpreted in a purposive way in order "to achieve fairness and predictability and to define the limits of the monopoly" ( Dimplex North America Ltd. v. CFM Corp. , 2006 FC 586 , 292 F.T.R. 38 at para. 49 [ Dimplex ] , aff'd 2007 FCA 278 , 60 C.P.R. (4th) 277 ). [ 58 ] Construction of the claims is a matter for the Court to determine. The Court is called on to determine, on an objective basis, what a hypothetical skilled person would have understood the invention to mean ( Whirlpool , above, at paras. 45, 53 ).

Where a patent is of a highly technical nature, the person skilled in the art will be someone possessing a high degree of expert scientific knowledge in the particular field of art to which the patent relates ( Aventis Pharma Inc. v. Apotex Inc. , 2005 FC 1283 , 278 F.T.R. 1 [ Ramipril I (FC) ] ; Apotex Inc. v. Syntex Pharmaceuticals International Ltd et al (1999), 1999 CanLII 7968 (FC) , 166 F.T.R. 161 at para. 38 , [1999] F.C.J. No. 548 (QL) (F.C.T.D.) . [ 59 ] Where necessary, the whole of the patent, and not only the claims, should be interpreted ( Eli Lilly Canada Inc. v.

Apotex Inc. , 2008 FC 142 , 63 C.P.R. (4th) 406 at para. 25 ; Eli Lilly Canada Inc. v. Novopharm Ltd ., 2007 FC 596 , 58 C.P.R. (4th) 214 at para. 103 ). The Court should construe the claims in light of the description in the specification, assisted by experts as to the meaning of technical terms if such terms cannot be understood by the Court from reading the specification ( Shire Biochem Inc. v.

Canada (Minister of Health) , 2008 FC 538 , 328 F.T.R. 123 at para. 22 [ Shire ] ; Whirlpool , above, at para. 45 ). [ 60 ] It is also important to recognize that purposive construction should be directed at the points in dispute between the parties ( Shire , above, at para. 22 ). [ 61 ] Lastly, as the '380 Patent was issued under the old Patent Act , all claims at issue are to be construed as of the date the patent was granted and issued ( Pfizer Canada Inc. v. Canada (Minister of Health) , 2005 FC 1725 , 285 F.T.R. 1 at para. 36 ).

For the '380 Patent, that date is January 31, 1984. [ 62 ] With these overarching principles in mind, I turn to the patent in question. B. The hypothetical skilled person [ 63 ] As noted, claims must be construed from the view of a hypothetical skilled person. Thus, as a preliminary matter, I must define what attributes would be held by our hypothetical skilled person. [ 64 ] In its final written argument, Apotex described the person to whom the '380 Patent is addressed as follows: The skilled addressee of the ’380 Patent is a notional person having a thorough knowledge of cultivating fungal micro-organisms.

Such a person may have an advanced degree, such as a Ph.D., in biochemistry, mycology or industrial biochemical processes and several years of related practical experience in an industrial setting. The skilled addressee would also include pharmaceutical formulators, and medical and organic chemists interested in using the compounds of the alleged invention to treat hyperlipemia and hypercholesteremia. [ 65 ] Given the nature of this product-by-process patent, I believe that experience and knowledge related to fungal micro-organisms is fundamental.

This expertise would, in my view, include both academic qualifications and technical experience. Identification of micro- organisms, developing, recognizing and identifying productive strains and growing cultures in appropriate media for commercialization are all aspects of the '380 Patent with which the skilled addressee must be familiar. I agree with Dr. Clardy when he states (Clardy Expert Report, Exhibit 17, para. 25):

… [F]ermenting fungi to obtain secondary metabolites requires experience beyond ordinary academic training and because isolating natural products from fermentations requires the interplay of chemistry, biosynthesis and biological assays beyond formal academic training. [ 66 ] Since the invention consists of processes for preparing compounds that are targeted to lower serum cholesterol, the skilled person would have sufficient knowledge of medical and organic chemistry to be able to understand cholesterol biosynthesis.

This expertise could be acquired through academic training or clinical practice. [ 67 ] With these remarks on some of the skills necessary, I accept Apotex’s description of the person to whom the '380 Patent is addressed. C. The Patent Specification [ 68 ] I begin with a brief overview of the patent specification. [ 69 ] The '380 Patent is what is commonly described as a product-by-process patent.

That is, the inventors do not make a specific (or per se ) claim to the compound lovastatin; rather, they claim the product lovastatin and three other compounds when the compounds are made by the processes described in the patent. The '380 Patent is entitled “HYPOCHOLESTEREMIC FERMENTATION PRODUCTS AND PROCESS OF PREPARATION”. As set out in the

summary: This invention relates to hypocholesteremic products from the cultivation of a microfungus of the species Aspergillus . More specifically, it relates to compounds of the formulae: as well as pharmaceutically acceptable salts and lower alkyl and substituted alkyl esters of the carboxylic acids in which the possible substituent is phenyl, dimethylamino or acetylamino. The invention also relates to a process of cultivating the microfungus and isolating from the medium a hypocholesteremic compound of the above structures.

These new compounds have excellent properties of inhibiting cholesterol biosynthesis and are useful against hypercholesteremia and hyperlipemia. [ 70 ] I was assisted in understanding the chemical structures of, and relationship amongst, the four compounds identified in this

summary (and set out in claim 1) by Drs. Lasure, Clardy and Samson. [ 71 ] Compound I is the marketed product named lovastatin. Compound II is dihydro-lovastatin. It differs from lovastatin (Compound

I) only in relation to the bonds in the double ring structure. Compounds I and II are both lactones, meaning that the ring at the top right of the structure is closed. Compound III is the open acid or hydroxy acid form of Compound I and Compound IV is the open acid or hydroxy acid form of Compound II. Each of Compounds III and IV has an open ring at the top with a COOH (carboxyl) group. [ 72 ] At p. 2 of the patent description, the inventors disclose, as prior art, the work and patents of Endo and others related to the

compound compactin: Recently, Endo et al., described (U.S. 4,049,495 and 3,983,140) a fermentation product obtained by cultivation of a micro-organism of the genus Penicillium and isolation from the medium. They called it ML 236 B and determined its structure together with two related compounds 236 A and 236 C. Its structure, under the name compactin, was also determined by A.G. Brown, T.C. Smale, T.J. King, J. Chem. Soc. (Perkin I) 1165 (1975).

This compound has been found to be an inhibitor, in vivo, of the biosynthesis of cholesterol. [ 73 ] The inventors then distinguish their invention from that of the prior art. We have found that unexpectedly, the cultivation of a micro-organism very different from that employed by Endo, a microfungus of the genus Aspergillus , produces new substances that are also very potent inhibitors of the biosynthesis of cholesterol in mammals. We have further found that these substances comprise principally the new compounds I, II, III and IV, of the above structures, accompanied by only traces of other compounds.

These new compounds are much more potent inhibitors of cholesterol synthesis in vivo than is the compound, ML236B described by Endo. [ 74 ] In short, the patent specification discloses that the inventors of this patent built on the existing work of Endo and others in relation to the anti-cholesterol properties of compactin.

They discovered that the Compounds I, II, III and IV, cultivated from “a microfungus of the genus Aspergillus ”, rather than from the genus Penicillium , were more potent inhibitors of cholesterol synthesis in vivo than compactin. [ 75 ] At p. 3 of the patent specification, the inventors state that, “The compounds of this invention are highly useful as antihypercholesteremic agents for the treatment of atherosclerosis, hyperlipemia and like diseases in humans.” [ 76 ] Beginning on p. 4, the inventors begin their more detailed description of how this invention relates to a process for producing the identified compounds.

From the experts, I have learned that the method of production of the '380 Patent is described as a “fermentation”. Dr.

Lasure described this as follows (Lasure Expert Report, Exhibit 48, para. 20): Unlike more traditional processes by which chemists may synthesize chemical compounds in a laboratory or a factory using controlled chemical reactions in vitro, the process disclosed in the ‘380 Patent is a biological process involving the use of a specific fungus that synthesizes lovastatin in vivo when that fungus is grown in or under certain conditions which the ‘380 Patent calls a “fermentation”. [ 77 ] The inventors describe their use of two sample micro-organisms from the culture collection of Merck and Co., referred to as MF-4833 and MF-4845.

These two micro-organisms were placed on deposit with the American Type Culture Collection (ATCC) and assigned accession numbers ATCC 20541 and ATCC 20542 respectively. It is clear that the inventors are not limiting their invention to the use of these two micro-organisms.

Although the use of these is described in connection with the process of this invention, other organisms of the genus Aspergillus including mutants of the above ones are also capable of producing these novel compounds and their use is contemplated in carrying out the process of this invention. [ 78 ] In the paragraph that follows, the inventors disclose that: The morphological characteristics of the micro-organisms MF-4833 and MF-4845 have been found to be those of the genus Aspergillus .

Using the criteria specified in the standard authority . . . and by comparison with known species, it has been determined that both strains are Aspergillus terreus . [ 79 ] Beginning at the bottom of p. 5, the process of fermentation is described, with reference to such matters as illustrative media, optimal temperature ranges and the pH of nutrient media suitable for growing the culture. More detail is provided regarding fermentation scaling, from the initial culture in small flasks to the large-scale fermentation tanks.

Once the fermentation broth is made, the reader is instructed that the compounds are conveniently isolated from the fermentation broth as lactones I and II or, alternatively, as salts of Compounds III and IV. Other methods of yielding the compounds of the invention are disclosed. [ 80 ] The physico-chemical properties of the compounds are set out starting at p.8. At p. 9-10, the inventors set out their belief, “with a considerable degree of certainty”, the stereo chemical structures of Compounds I and III. Similar data and stereo chemical structures of Compounds II and IV are described at p. 11-12.

[ 81 ] The specification, from p. 13 to 43, illustrates the “invention” with 27 examples. D. The claims in issue [ 82 ] M erck, as it outlined in a response to a demand for particulars dated July 8, 1998, alleged that claims 1 to 8, 10, 11, 13 to 16, 18 and 19 of the '380 Patent were infringed by the Defendants. Merck specifically stated that it was not relying upon every claim in the '380 Patent. [ 83 ] In their Statements of Defence and Counterclaim, Apotex asserts that all of the claims of the '380 Patent are invalid.

Subsequent submissions of the parties lead me to the conclusion that, at this stage, the only claims still in issue – and that require construction – are claims 1 to 8 and 13 to 15. I have set out claim 1 in full below. The remaining claims are included in Appendix B to these reasons. 1.

A process of producing the compounds of structural formulae: which compromises fermenting a nutrient medium with a microorganism of the genus Aspergillus terreus and isolating the products and when desired converting said products to their corresponding pharmaceutically acceptable salt or lower alkyl ester or a substituted lower alkyl ester wherein the substituent is phenyl, dimethylamine or acetylamine or the cation of the salt is derived from ammonia, ethylenediamine, N-methyl-glucamine, lysine, arginine or ornithine. [ 84 ] The disagreement between the parties focuses on aspects of claim 1.

The proper construction of the other claims at issue flow from a resolution of the construction of claim 1. That is, a proper construction of claim 1 will be determinative of the main points in dispute for the remainder of the claims in issue, claims 2 to 8 and 13 to 15. [ 85 ] The areas of disagreement between Apotex and Merck are the following: 1. What is the meaning of the phrase “a micro-organism of genus Aspergillus terreus ” in claim 1? 2. What is the meaning of the word “isolating” in claim 1? 3.

Does the '380 Patent promise that all strains of Aspergillus terreus will be capable of producing the four compounds of the invention?

4. What is the promised use of the claimed invention? [ 86 ] The final two construction issues relate to the “promise” of the '380 Patent. The question of what is promised – or not – by the '380 Patent is primarily relevant to the question of the utility of the patent. However, it is an analysis that logically forms part of the '380 Patent claims construction. [ 87 ] Generally, ascertaining the promise of a patent is an exercise that requires the assistance of expert evidence ( Bristol -Myers Squibb Co. v. Apotex Inc. , 2007 FCA 379 , F.C.J. No. 1579 (QL) at para. 27).

This is because the promise should be properly defined, within the context of the patent as a whole, through the eyes of a person of skill in the art. E. The meaning of “a microfungus of genus Aspergillus terreus” in claim 1 [ 88 ] The first construction issue raised by Apotex relates to the proper

interpretation of the words “a micro-organism of the genus Aspergillus terreus ” in claim 1. [ 89 ] Claim 1 speaks to a process for producing four compounds “which comprises fermenting a nutrient medium with a micro- organism of the genus Aspergillus terreus . . ..” Apotex argues that, on a proper

interpretation of claim 1, a skilled person would read the words “genus Aspergillus terreus ” as referring to all micro-organisms in the genus Aspergillus . Merck asserts that claim 1 is limited to micro-organisms of the species Aspergillus terreus . [ 90 ] The nomenclatures used in the '380 Patent would be understood by any high school biology student (and even this judge) as part of the binomial system of naming living organisms. All living organisms are named according to a hierarchy of classifications. The hierarchy is as follows: (

i) Kingdom (ii) Phylum (iii) Class (iv) Order (

v) Family (vi) Genus (vii) Species In accordance with the accepted binomial convention, living organisms are identified by using the name of the genus (capitalized) together with the name of the species within the genus (lower case). [ 91 ] There is no such genus as Aspergillus terreus . As I have learned from the experts in this case, Drs. Clardy, Lasure and Samson, the well-established rules of taxonomy dictate that Aspergillus is a genus and that Aspergillus terreus is a species within the genus Aspergillus . As submitted by the parties, the use of the term “genus Aspergillus terreus ” in claim 1 can mean one of two things: (

a) the inventors were claiming only those compounds made with micro-organisms of the species Aspergillus terreus, and inadvertently used the term “genus” in place of “species” (Merck’s position); or, (

b) the inventors were claiming compounds produced from any micro-organism falling within the genus Aspergillus (Apotex’s position).

[ 92 ] Even without expert assistance, it appears to me that the first option provides the preferable

interpretation. There is no question that the skilled reader would recognize Aspergillus terreus as a species – that is, a subset of the genus Aspergillus . The skilled reader would assume that the inventors intended that claim1 include only the micro-organisms of the genus Aspergillus that belong to the species terreus . To read the phrase as including all species within the genus Aspergillus would ignore the plain meaning of the term terreus , as used in the claim. [ 93 ] Not only does my construction of the words accord with common sense, it is consistent with the opinions of Drs. Lasure and Clardy.

In the view of Dr. Clardy (Clardy Expert Report, Exhibit 17, para. 33): … [T]he words Aspergillus terreus were in January 1984 and remain today words which, by definition, mean and would be read by the skilled person to describe a subset or sub-category of Aspergillus that is not and cannot include the entire Aspergillus genus. [ 94 ] Initially, Dr. Samson expressed a different

interpretation of this phrase and concludes that (Samson Expert Report, Exhibit 109, para. 37): … [B]ased on the repeated references in the patent to the use of a micro-organism of the “genus Aspergillus ” and from the balance of my review of the ’380 Patent described above, it is my opinion that a person skilled in the are would have concluded that the inventors did not intend to place any limits on the micro-organisms that can be used in the process other than that they be from the genus Aspergillus . [ 95 ] I acknowledge that the disclosure or specification of the '380 Patent makes a number of references to the “genus Aspergillus ”. Nevertheless, the key problem with Dr. Samson’s

interpretation of the phrase “genus Aspergillus terreus ” in claim 1 is that it ignores completely the word “ terreus ”. If I were to accept Dr. Samson’s opinion, I would be expanding the claim from “ Aspergillus terreus ” to the much broader designation of “ Aspergillus ”. As Dr. Samson stated, there are over 250 species that fall within the genus Aspergillus (Samson Expert Report, Exhibit 109, para. 17). [ 96 ] Dr.

Samson’s approach to claims construction is contrary to the teachings of the Supreme Court in Whirlpool , above, at paragraph 52 , where Justice Binnie refers to the statement of Taschereau J. in Metalliflex Ltd. v.

Rodi & Wienenberger AG (1960), 1960 CanLII 83 (SCC) , [1961] S.C.R. 117 (S.C.C.) , at p. 122 : The claims, of course, must be construed with reference to the entire specifications, and the latter may therefore be considered in order to assist in apprehending and construing a claim, but the patentee may not be allowed to expand his monopoly specifically expressed in the claims "by borrowing this or that gloss from other parts of the specifications" . [Emphasis added.] [ 97 ] During cross-examination, Dr. Samson appeared to have qualified or changed his opinion.

Specifically, he agreed that “the inclusion of the word ‘ terreus ’ in claim 1 excludes all other species of Aspergillus including niger and nidulus and oryzae and the other 246 [species].” [ 98 ] Moreover, when read in its entirety, the specification is consistent with the limitation of the invention to micro-organisms of the species Aspergillus terreus . For example, the inventors disclose the use of micro-organisms MF-4833 and MF-4845; these are examples of Aspergillus terreus and not of some other species within the genus Aspergillus . [ 99 ] In

summary on this point, the words of claim 1 make it very clear that the patentee is not claiming compounds made with any of the 250 species of Aspergillus ; rather, the boundary of the invention, as claimed, includes the four identified compounds when made with a single species – Aspergillus terreus . The use of the word “genus” before “ Aspergillus terreus ” may have been a simple inconsequential error by the drafters or the patentee may have intended the word “genus” to modify only the word “ Aspergillus ” and not the entire phrase “ Aspergillus terreus ”.

Regardless, given the specificity of the term “ Aspergillus terreus ”, the use of the word “genus” would not change the meaning ascribed to the phrase by the skilled addressee. F. The meaning of “isolating the products” [ 100 ] The second construction issue concerns that part of claim 1 which states that the process of producing the compounds “comprises fermenting a nutrient medium with a micro-organism of the genus Aspergillus terreus and isolating the products . . .”.

[ 101 ] The parties disagree on the meaning of the phrase “isolating the products”. Apotex submits that claim 1 requires the production of all four of the compounds, that claim 2 requires the production of both Compound I and II (the lactones) and that claim 5 requires the production of both Compound III and IV (the hydroxy acids). In other words, Apotex argues that, for purposes of the claims, the compounds must be separated from each other, purified and crystallized before they are “isolated”.

Merck submits that “isolating” simply means separating the compounds from the fermentation broth and does not require the compounds to be purified or crystallized. [ 102 ] The term “isolating” is not defined in the patent. Therefore, it is necessary to review the specification to determine what meaning was reasonably intended by the inventors. [ 103 ] Example 1 of the '380 Patent is entitled “Preparation of Compounds I and III”. The inventors first set out a procedure for fermenting a particular culture of Aspergillus terreus .

At the end of this step, the skilled person would have a fermentation broth that is “set aside for isolation of the product”. After the fermentation is completed, the next step is the “Isolation of Compound I”. This involves separating the broth solids from the broth liquids, extracting the liquids using a mixture of solvents and extracting the solids. The resulting extracts are combined and concentrated to 15 ml of crude extract. There is no purification or crystallization described as part of the “Isolation of Compound I”. Further, the next step – “Testing of Compound I” – is carried out on the crude extract.

There is no further purification or crystallization carried out before the testing. [ 104 ] In reviewing the examples of the patent, I note that Examples 3, 4 and 5 all refer to isolation without any purification or crystallization. [ 105 ] From the specification, I conclude that the inventors meant the term “isolating” to simply refer to separating the compounds from the broth. This was the

interpretation given to the term “isolating” by Dr. Clardy who opined that (Clardy Expert Report, Exhibit 17, para. 102): In the ‘380 Patent "isolating" does not necessarily require complete separation or purification of the active compounds. The concept of "isolating the products" of a fermentation as those words are used in the patent requires getting the products out of the fermentation broth. The products do not necessarily have to be isolated from one another nor be crystalline, nor be completely purified. All of this would be understood by the skilled person reading the patent in January 1984.

I note that the "Isolation of Compound I" in Example 6 is more complex and includes the further purification and crystallization of a specific fraction containing Compound I, but example 1 makes clear that such steps are optional and not necessarily required for "isolating" as that word is used in the patent. [ 106 ] Dr. Samson provided a contrary view. In his Reply Expert Report, Dr. Samson opines as follows (Samson Reply Expert Report, Exhibit 11, para. 41): The '380 Patent says that the compounds are extracted or isolated from the fermentation broth as “hypocholesteremic compounds” (see page 2, lines 4 to 7).

This would have been understood by a person skilled in the art to mean that the invention requires that the compounds be removed from the fermentation broth and isolated from any other compound in the broth, and then purified and crystallized so that they can be useful as “hypocholesteremic compounds”. [ 107 ] I have difficulty with Dr. Samson’s understanding of the term “isolating”. Foremost, this

interpretation ignores much of the content of the specification that describes the testing of the crude extract. During cross-examination, Dr. Samson acknowledged that, in some of the examples, there was no purification, separation or crystallization prior to testing. Nevertheless, he clung – unreasonable, in my view – to the opinion that the skilled person would presume that “isolation” or “isolating” includes the steps of extraction, crystallization and separation. [ 108 ] Beyond the disclosure of the '380 Patent, the

interpretation proposed by Merck is also supported by the reading of claim 1 in the context of the other claims – in particular claim 13. The general process is set out in claim 1. Claim 13 is a claim to a compound selected from Compounds I, II, III and IV. Had the inventors intended claim 1 to require a separation of each compound from the others, they could have used similar language of selection.

The use of the phrase “isolating the products ” rather that “isolating each product ” is a strong indication, for the skilled reader, that the inventors did not intend that each of the compounds be separated from each other, purified and crystallized. [ 109 ] In sum, I am satisfied that, on a proper claims construction, the words “isolating the products” in claim 1 do not require that the relevant compounds be separated from each other, purified or crystallized prior to testing.

G. Inclusion of non-producing strains [ 110 ] For the third construction question, Apotex submits that, whether the Court construes the phrase “genus Aspergillus terreus ” in claim 1 to include all micro-organisms or fungi within the genus Aspergillus or just those within the species Aspergillus terreus , the '380 Patent promises that all such micro-organisms can be used to produce the compounds in the Patent.

Merck, on the other hand, asserts that the person skilled in the art would know – and eliminate from coverage of the '380 Patent – any strain or fungus that cannot produce the claimed compounds. [ 111 ] Neither claim 1 nor the specification explicitly states that the '380 Patent excludes non-producing strains of Aspergillus terreus .

The question to be determined is whether the skilled addressee, in 1984, would know that the claims of the '380 Patent are limited to the producing strains of Aspergillus terreus . [ 112 ] An essential element of the invention embodied in the '380 Patent is the production of particular compounds through the process of fermentation or cultivation of fungi. As described by Dr. Lasure, who has extensive experience working with such micro- organisms, “a culture of Aspergillus terreus is a living sample of a fungus from that species” (Lasure Expert Report, Exhibit 48, para. 60).

Thus, within species, there are variations. [ 113 ] Dr. Sorensen described the organic compounds that are produced by fungi as “secondary metabolites”. “Secondary metabolites” are compounds produced as a result of the metabolic function of the initial fungal micro-organism during the fermentation process (Sorensen Expert Report, Exhibit 132, para. 6). While Dr.

Clardy opined that “in the general case it was expected that a particular isolate from a producing species would be expected to produce a given metabolite,” he cautioned that there is always a possibility of non-production, for a number of reasons, all of which would have been known in 1984 (Clardy Expert Report, Exhibit 17, paras. 39-41): • fungi can be intentionally mutated to disrupt the genes responsible for making a metabolite; • fungi can lose a producing ability over time because of subculturing, or mishandling, or reasons that are never understood; • some fungi in a producing species simply do not have production capability, although Dr.

Clardy thought that this would be unusual except where the isolates have been maintained by serial subculturing; • fungi tend to change randomly, especially when stored and maintained artificially by scientists; • if during subculturing, a sample of a variant is taken for further growth, and especially if there is repeated subculturing, the fungus can become one in which a characteristic of the parent culture is lost; and • physical deterioration of the fungus will lead to loss of specific metabolic functions. [ 114 ] Dr.

Clardy summed up the situation as follows (Clardy Expert Report, Exhibit 17, para. 42): It was part of the common knowledge of the skilled person in 1984 and such a person would have known, with virtual certainty, that among the many isolates (or strains) of a given species there would inevitably be found isolates that have lost the capacity to produce a particular metabolite under particular conditions, or in some rare cases, that never had an ability to produce the metabolite at all. [ 115 ] Dr. Samson did not share this opinion.

In his view, the skilled person would interpret the claims as including the production by Aspergillus of all four identified compounds (Samson Expert Report, Exhibit 110, para. 52). He disagreed that the exclusion of non- producing strains was implicit. However, during cross-examination, he acknowledged that the opinions of Drs. Lasure and Clardy were “both scientific opinions that a reasonable person of ordinary skill in the art could have reached in January 1984”.

[ 116 ] Dr. Samson, during cross-examination, also agreed that the person of ordinary skill in 1984 would have been fully aware that not every strain in a species will make a given metabolite. Even more specifically, Dr. Samson acknowledged that, in 1984, a skilled person reading the claims of the '380 Patent would know that there are strains of Aspergillus terreus that would not produce lovastatin. [ 117 ] In sum, I prefer the opinions of both Drs. Lasure and Clardy to the effect that a skilled person would know, from his or her general knowledge, that: (

a) there are many variations in the micro-organisms within the species Aspergillus terreus , such that not every micro-organism within the species will necessarily provide the desired results and that some testing and routine experimentation will be required; and (

b) the term “nutrient medium”, as used within the patent description, would include the media used in the examples and other media that, upon routine testing, would result in the desired compounds. [ 118 ] In light of this general knowledge, Drs. Clardy and Lasure were both of the opinion that the skilled person would recognize – even without an explicit limitation in the claims – that the claims of the '380 Patent exclude non-producing strains of Aspergillus terreus .

The use of the word “producing” in claim 1 tells the skilled person that non-producing strains are excluded, even though the explicit words are not used. [ 119 ] Further support for the conclusion reached by Drs. Clardy and Lasure is contained within the disclosure. In addition to the disclosure of the structure of the compounds and the therapeutic activity of the compounds, the skilled person is provided with examples of the media and conditions that could be used. [ 120 ] Moreover, the skilled person would also bring to his or her laboratory “bench”, a set of skills used routinely.

In light of the nature of fungi and their use in the pharmaceutical industry, it appears logical to me that the skilled person would have extensive experience with the types of experimentation and testing that are used to identify and optimize producing micro-organisms. During cross-examination, Dr. Samson confirmed that a number of experiments, known in 1984, could have been performed simultaneously, in a short period of time, to identify the producing micro-organisms. He agreed that about 300 shake flask experiments could be run at one time.

The skilled person could rapidly screen a large numbers of isolates of Aspergillus terreus to determine which strains are producing. Moreover, since, on my construction, the claims are limited to strains of the species Aspergillus terreus , there are manageable boundaries on the testing that would be required. [ 121 ] Having considered the evidence of the three experts, I am persuaded that the opinions of Drs. Lasure and Clardy on this point are to be preferred to that of Dr. Samson.

An implicit requirement that non-producing strains are excluded from the coverage of claim 1 is “being neither benevolent nor harsh but rather seeking a construction which is reasonable and fair to both patentee and public” ( Consolboard Inc. v. MacMillan Bloedel (Saskatchewan) Ltd. , 1981 CanLII 15 (SCC) , [1981] 1 S.C.R. 504 at p.520, 56 C.P.R. (2d) 145 [ Consolboard cited to S.C.R.]). I do not accept Apotex’s assertion that the '380 Patent states, implies or promises that all strains of Aspergillus terreus will be capable of producing the four compounds of the claimed invention. H.

The promised use of the '380 Patent [ 122 ] As a final construction issue, Apotex submits that the '380 Patent makes the explicit promise that the four compounds identified in claim 1 are “highly useful as anti-hypercholesteremic agents for the treatment of atherosclerosis, hyperlipemia and like diseases in humans”. [ 123 ] The “promise” of the '380 Patent appears to be clearly set out in at least two places in the specification.

In the “Summary of the Invention”, at p. 2 of the patent, the patentees state that: These new compounds have excellent properties of inhibiting cholesterol biosynthesis and are useful against hypercholesteremia and hyperlipemia. [ 124 ] A slightly more detailed promise is found at p. 3, where the patentees explain that:

The compounds of this invention are highly useful as antihypercholesteremic agents for the treatment of atherosclerosis, hyperlipemia and like diseases in humans. [ 125 ] Dr. Samson’s opinion is that the detailed statement in the patent (p.3) expresses the promise of the '380 Patent (Samson Expert Report, Exhibit 110, para. 25). Although Dr.

Lasure did not directly respond to the question of what was the promise of the patent, she described the uses of the '380 Patent to include the following (Lasure Expert Report, Exhibit 48, para. 21): With respect to uses, the ‘380 Patent discloses that the four compounds (and salts and esters of them) can be used to inhibit cholesterol biosynthesis, can be used against hypercholesteremia (high levels of cholesterol in the blood) and hyperlipidemia (high levels of lipids in the blood) and can be used as antifungal agents (to kill or inhibit growth of fungi on plants).

Anti-fungal properties have not been referred to by Apotex in this matter. The issue for this trial is focused on the medical use. [ 126 ] Based on the words of the specification and supported by the opinions of Drs. Lasure and Samson, I find that the skilled person would read the '380 Patent as promising that the compounds (or secondary metabolites) produced from strains of Aspergillus terreus , by the fermentation process identified in the patent, are “useful as antihypercholesteremic agents for the treatment of atherosclerosis, hyperlipemia and like diseases in humans”. I.

Summary on Claims Construction [ 127 ] Considering the words of the claims of the '380 Patent and the specification and guided by the expert testimony, the relevant claims of the patent should be construed in the following manner: • Claim 1 is a claim to a process for producing the four identified compounds by a fermentation process using the range of nutrient media and conditions described in the specification (or as would be generally known to the skilled person), following which the compounds are isolated or extracted from the fermentation broth by any of the known means identified in the specification (or as would be generally known to the skilled person).

Of particular relevance to this litigation: ○ the micro-organism or fungus to be used is a strain of the species Aspergillus terreus , excluding those strains that are unable to produce the desired compounds and excluding micro-organisms from other species within the genus Aspergillus ; and ○ after the fermentation stages of the process, the resulting broth may contain any or all of the four compounds. [ 128 ] With this construction of claim 1, the construction of claims 2 to 8 follows.

Each of these claims is a “subset” of claim 1, whereby the claim is restricted to: • the process of producing only Compounds I and II (claim 2) or Compounds III and IV (claim 5); • the process of producing the identified compounds using a particular originating micro-organism (claim 3 and 6); and • the process of producing the identified compounds using certain operational requirements (claims 4, 7 and 8). [ 129 ] Claim 13 claims any one of the four identified compounds (the same compounds as described in claim 1) when made by the process of claim 1 “or by an obvious chemical equivalent”.

Claim 14 is a similar claim to either Compound I or II when made by the process of claim 2 “or by an obvious chemical equivalent”. Claim 15 claims each of Compound III and IV when made by the process of

claim 5 “or by an obvious chemical equivalent”. [ 130 ] Finally, I find that the skilled person would read the '380 Patent as promising that the compounds (or secondary metabolites) produced from strains of Aspergillus terreus , by the fermentation process identified in the patent, are “useful as antihypercholesteremic agents for the treatment of atherosclerosis, hyperlipemia and like diseases in humans”. VI. Infringement – Background A. Introduction [ 131 ] Having established the proper construction of the relevant claims of the '380 Patent, I now turn to the question of infringement. [ 132 ]

Section 44 of the Patent Act confers on a patentee and his legal representatives "the exclusive right, privilege and liberty of making, constructing, using and vending to others to be used the invention" of a patent. Merck claims that the Defendants infringed their rights under the '380 Patent by the production of lovastatin using the Aspergillus terreus micro-organism.

Specifically, Merck claims infringement in three different scenarios: 1. infringement through the manufacture (during Phase 1 of production described above), by AFI in Winnipeg, of quantities of lovastatin included in batch CR0157; 2. infringement, between April 1997 and March 1998, through the manufacture by Blue Treasure of quantities of infringing lovastatin that were shipped to AFI, when Blue Treasure was allegedly “salting” the lovastatin shipments with infringing Aspergillus terreus lovastatin; and 3. infringement from March 1998, when Blue Treasure was allegedly shipping lovastatin manufactured with Aspergillus terreus . [ 133 ] Subject to the possible exceptions of regulatory or experimental use, the making, constructing, using or vending lovastatin using Aspergillus terreus would be an infringement of the '380 Patent.

Thus, if Merck can satisfy the Court that certain volumes of lovastatin made from the product received from Blue Treasure were manufactured from or contained, through “salting”, Aspergillus terreus lovastatin, infringement has been established. Similarly, if Merck can persuade the Court that batch CR0157 contained lovastatin manufactured from Aspergillus terreus , infringement has been proved. B. Burden [ 134 ] The first point to be made is that proof of infringement is subject to the civil standard of proof. Merck’s burden – whatever it may be – is met if infringement can be shown on a balance of probabilities.

Stated in different words, Merck will succeed if it is more likely than not that infringement occurred. [ 135 ] It is trite law that the party alleging infringement bears the burden of proving infringement (see Monsanto Canada Inc. v. Schmeiser , 2004 SCC 34 , [2004] 1 S.C.R. 902 at para. 29 [ Monsanto ] ). However, consideration must be given to the scheme of the Patent Act and, in particular, to s. 39(2). Under the Patent Act applicable to this action, s. 39(1) provides that:

39. Naturally occurring substances intended for food or medicine—

(1) In the case of inventions relating to naturally occurring substances prepared or produced by, or significantly derived from, microbiological

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