Decisions > Federal Court Decisions > AstraZeneca Canada Inc. v. Apotex Inc.
AstraZeneca Canada Inc. v. Apotex Inc.
 This is an application brought by AstraZeneca Canada Inc. and AstraZeneca Aktiebolag (collectively AstraZeneca) under the provisions of the Patented Medicines (Notice of Compliance) Regulations, SOR/93 – 133, as amended (NOC Regulations), for an Order prohibiting the Respondent, Minister of Health, from issuing a Notice of Compliance to the other Respondent, Apotex Inc., for 20 and 40 mg esomeprazole magnesium tablets until after the expiry of Canadian Patent No. 2,139,653 (the ‘653 patent). For the reasons that follow, I will dismiss the application with costs to Apotex at the column 4 level.
 The Applicants, described as the “first person” in the NOC Regulations, are AstraZeneca Canada Inc., the Canadian licencee and AstraZeneca Aktiebolag the owner, respectively, of the ‘653 patent. They are also sometimes described as “the brand” or “innovators”. The Respondent Apotex Inc. described as a “second person” in the NOC Regulations, is a Canadian generic drug company who wishes to sell a generic version of AstraZeneca’s esomeprazole product in Canada. The Minister of Health is responsible for administering the NOC Regulations and is required to issue a Notice of Compliance to Apotex to sell its generic drug in Canada if this application is dismissed.
 AstraZeneca has received a Notice of Compliance to sell a drug in Canada containing esomeprazole magnesium as an active ingredient. This drug is sold under the brand name NEXIUM in 20 and 40 mg strength tablets. It is said to be useful in the treatment of conditions wherein a reduction of gastric acid secretion is required, such as reflux esoplagitis, nonerosive reflux disease and NSAID-associated gastric ulcers.
 Apotex wishes to sell a generic version of this drug in Canada and has applied through the Abbreviated New Drug Submission (ANDS) procedure under the Food and Drug Act, R.S.C. 1985, c. F-27 to receive a Notice of Compliance permitting it to do so. In that regard, Apotex as was required by the NOC Regulations served a Notice of Allegation, dated January 17, 2008, on AstraZeneca alleging that the ‘653 patent which AstraZeneca had listed under the NOC Regulations, was invalid, and would not be infringed. Whereupon AstraZeneca commenced these proceedings pursuant to the NOC Regulations to prohibit the Minister from granting a Notice of Compliance to Apotex until the expiry of the ‘653 patent. The issues have been reduced so that what remains for determination is only whether Apotex’s allegations that claim 8 of the ‘653 patent is invalid on a number of grounds, are justified within the meaning of section 6(2) of the NOC Regulations.
 By an Order of a Prothonotary of this Court, granted on consent on August 26, 2009, the 24-month statutory stay pursuant to section 7 of the NOC Regulations was extended to September 30, 2010.
 AstraZeneca has been zealous in enforcing patents that it has secured in Canada relating to omeprazole based products, of which the current application is one.
In AstraZeneca Canada Inc. v. Canada (Minister of Health),  2 S.C.R. 560, 2006 SCC 49, the Supreme Court of Canada allowed an appeal from the Court of Appeals which quashed Apotex’s NOC. The Supreme Court held that the Federal Court was correct that Apotex was not required to address the after‑issued patents of AstraZeneca. Here, the Court dealt with a situation where AstraZeneca’s original patent directed to omeprazole had expired, it discontinued its original formulation and had commenced to market a new formulation. Applicants listed under the NOC Regulations, two patents directed to the new formulation. Apotex wanted to market the original formulation and a question arose whether it could do so.
In AB Hassle v. Apotex Inc., 2002 FCT 931, AstraZeneca assumed a patent directed to the coating of omeprazole cores with a subcoat or a coat to provide for enteric release. Apotex was precluded from getting an NOC to sell the product because its Notice of Allegations did not comply with the NOC Regulations. The Court found the NOA deficient in that it lacked detailed statements of the legal and factual basis for the allegation of non-infringement.
In AB Hassle v. Canada (Minister of National Health and Welfare) (T.D.),  3 F.C. 221, 2001 FCT 1264, Apotex was granted the NOC because the Court held that the patent would not be infringed. AstraZeneca filed the patent for the use of omeprazole in the treatment of Campylobacter infections. Apotex sought to market omeprazole for another use which would not be for the treatment of Campylobacter infections.
In AstraZeneca AB v. Apotex Inc., 2004 FC 313, the Court dismissed the application and allowed the Minster to issue the NOC to Apotex. The Court held that the patent in issue would not be infringed. Apotex sought approval for its drug containing only omeprazole to be used to treat conditions where the reduction of gastric acid secretions is required. Applicants’ patent covered a combination product containing omeprazole and an antibiotic.
In AB Hassle v. Apotex Inc., 2003 FCT 771, the Court prohibited the Minister from issuing an NOC to Apotex when the Court held that adding base salts to omeprazole was a novel invention not known or disclosed in prior art.
AstraZenenca AB v. Apotex Inc., 2005 FCA 183, is an appeal by AstraZeneca from the trial court’s decision to dismiss its application and grant the NOC to Apotex. The Court of Appeal held that Apotex’s NOA was sufficient in its allegations and there were no reversible errors. Apotex had previously submitted and withdrew an NOA which alleged its product would have 70% crystallinity of an amorphous form of omeprazole which would thereby infringe Applicants’ product. The trial court held that since the newer NOA was separate and distinct and Apotex’s product would not infringe the innovator’s product.
AB Hassle v. Apotex Inc., 2004 FC 379, is an application under the NOC Regulations where two patents claim new uses for omeprazole or its salts to be used in combination with an antibiotic to act as an antimicrobial agent. The application for prohibition was dismissed because Apotex’s product would only comprise omeprazole as its sole active ingredient for use in the reduction of gastric acid secretion.
AstraZenenca AB v. Apotex Inc., 2006 FC 7, appeal dismissed, the application was dismissed because the Court held that the enteric coating of Apotex’s product made the formulation different and therefore would not infringe AstraZenenca’s product.
In AB Hassle v. Apotex Inc., 2005 FC 234, the Court granted the prohibition under the doctrine of issue estoppel in that Apotex could have brought its current allegations in a previous proceeding.
In AstraZenenca AB v. Apotex Inc., 2007 FC 688, the application was dismissed when the Court held the allegations of invalidity were justified in that prior art anticipated the claims in issue and some of the claims did not contain any therapeutic aspects.
In Genpharm Inc. v. AB Hassle, 2004 FCA 413, the Court of Appeal affirmed the trial court’s decision to grant the application for prohibition. Genpharm did not address non-infringement of all the claims in issue where some addressed taking omeprazole in combination with an antibiotic. Therefore, it did not advance the facts to support its allegation of non-infringement of those claims adequately enough.
In Hassle v. Canada (MNHW), T-366-98, appeal affirmed, the Court granted the prohibition holding that the generic product of RhoxalPharma would include an inert subcoating thereby infringing AstraZeneca’s product.
In AB Hassle v. Rhoxalpharma Inc., 2002 FCT 780, the Court granted the prohibition because of a concern that doctors would prescribe the generic version of the pill for uses in the treatment of H. pylori infections and other bacterial infections even though RhoxalPharma’s product monograph would specifically state its use is only for the reduction of gastric acid secretions.
 This application, as is common in many NOC applications, began with raising a number of issues, and issues within those issues. AstraZeneca put a number of claims of the ‘653 patent at issue, including claims 3, 7, 8, 27 and 28. Apotex was arguing non-infringement of several of those claims, as well as certain ‘bad faith” arguments arising out of section 53 of the Patent Act, R.S.C. 1985, c.P-4. As a result, there was some evidence filed which subsequently has become irrelevant. As well, the evidence of several witnesses became relevant only in respect of certain matters. I list all the witnesses, both expert and factual, whose evidence was filed by each party.
 Applicants filed affidavit evidence from the following Expert Witnesses: Dr. Armstrong, Dr. Davies, and Dr. Nelson. Affidavits from the following fact witnesses were filed: Dr. Larsson, Dr. Andersson, Ms. Feltmate, Dr. Kohl, Dr. Senn-Bilfinger, Dr. von Unge, and Ms. De Abreu.
Biochemistry at University of Texas at Arlington. He received a B.Sc. in interdepartmental science and math in 1972 from Washington & Lee University, Lexington, Virginia. In 1974, he obtained a Master's of Science in oceanography from Texas A&M University, College Station, Texas. In 1977, he received a Ph.D. in bio-organic chemistry, from Texas A&M University. The focus of his research has been on methods for separating chiral compounds. He has published over 400 peer-reviewed articles in the academic literature and is a lecturer. He is named as inventor or co-inventor in 11 patents.
Dr. Armstrong was asked: to describe the person of ordinary skill in the art (“POSITA”) to whom the Canadian Patent 2,139,653 (“’653 patent”) is addressed; and to rebut Apotex’s allegations of lack of novelty, lack of invention and willful misleading when looking at the ‘653 patent.
Dr. Davies is the Chairman of the chemistry department at the University of Oxford, where he has been teaching since 1980. He is also currently the Waynflete Professor of Chemistry at the University of Oxford. He earned a B.A. degree in 1973 and a D. Phil. Degree in 1975, both in Chemistry from the University of Oxford. He obtained a D.Sc. degree in Chemistry from the University of Paris in 1980. His research focuses on the preparation of enantiomerically pure compounds. Dr. Davies founded a company, Oxford Asymmetry, Ltd. In 1992 that provides homochiral compounds in commercial quantities.
Dr. Davies was asked: to describe POSITA to whom the Canadian ‘653 patent is addressed; to explain the ‘653 patent, in particular claims 7 and 8, from the view of the POSITA on December 8, 1994; and to rebut Apotex’s allegations of invalidity of the ‘653 patent, particularly anticipation, lack of invention – obviousness and Section 53 – wilful misleading.
Washington, Seattle, Washington. He received a B.S. in Pharmacy from Idaho State College in 1962 and a Ph.D. in Pharmaceutical Chemistry from the University of Kansas in 1965. Since 1965, he has been a Professor at the University of Washington. He considers himself an expert in the area of medicinal chemistry and researches the chemical and stereochemical aspects of the metabolism of cardiovascular drugs.
Dr. Nelson was asked: to describe POSITA to whom the Canadian ‘653 patent is addressed; to explain the ‘653 patent, in particular claims 7 and 8, from the view of the POSITA on December 8, 1994; and to rebut Apotex’s allegations of invalidity of the ‘653 patent, particularly obviousness and lack of sound prediction.
Dr. Larsson is currently employed as the Director of the Process Chemistry Group for AstraZeneca AB in Sweden. He was directly involved with research and development of manufacturing processes for the esomeprazole magnesium trihydrate. He is named as an inventor in about 58 patents related to his research. In 1985, he earned an M.S. in chemical engineering at the Royal Institute of Technology in Stockholm. Dr. Larsson received his Ph.D. degree in 1993 in organic chemistry from the Royal Institute of Technology.
Dr. Larsson was asked to discuss the work he did at AstraZeneca in 1993 with respect to making omeprazole enantiomers using the process identified in the DE 4035455 patent (“DE 455 patent”).
Dr. Andersson received a B.Sc. in Biology and a Ph.D. in Clinical Pharmacology in 1979 and 1991, respectively, from the University of Gothenburg, Sweden. In 1979, he joined Hassle AB, now AstraZeneca AB, and worked in the pre-clinical research group in the Pharmacology Department. In 1981, he moved to the clinical pharmacology group where he became involved with omeprazole. In 1993, he was appointed Project Team Leader for the Omeprazole Successor Project at AstraZeneca AB.
Dr. Andersson was asked: to describe the testing of esomeprazole alkaline salts in the context of the Omeprazole Successor Project at AstraZeneca AB, to describe the metabolic and pharmacokinetic properties of esomeprazole; and the resulting tests and trials that demonstrate these properties and improved clinical effects of esomeprazole magnesium.
Dr. Kohl is currently employed as Senior Director Process Chemistry for Nycomed GmbH in Konstanz, Germany where he supervises 40 people. He earned an equivalent of a masters degree in organic chemistry in 1976 and a Ph.D. in organic chemistry in 1979, both at the University of Munich. Dr. Kohl is named as a co-inventor in the DE ‘455 patent application.
Dr. Kohl’s mandate is to discuss the developments in research in the proton pump inhibitor field and the developmental history of the DE ‘455 patent application.
Concept Development by Nycomed GmbH in Konstanz, Germany. He has been employed by Nycomed, its predecessor Altana Pharma AG and its predecessor Byk Gulden Lomberg Chemische Fabrik GmbH, since 1978. He earned a Diploma degree in chemistry in 1975 from the University of Stuttgart, Germany and completed a doctorate in chemistry at the University of Stuttgart, in 1978. Dr. Senn-Bilfinger is named as a co-inventor in the DE ‘455 patent application.
Dr. Senn-Bilfinger’s mandate is to discuss the developments in research in the proton pump inhibitor field and the developmental history of the DE ‘455 patent application.
Dr. Von Unge is a principal scientist in the Medicinal Chemistry department at AstraZeneca R&D (formerly Hassle AS) and has been employed there since 1988. He obtained a Master of Science in Engineering in 1983 from Chalmers University of Technology in Sweden. He is named as a co-inventor of the ‘653 patent.
Dr. Von Unge’s mandate was to discuss his involvement in the developmental history of the ‘653 patent.
Ms. Feltmate is the Vice-President of Operations, Business Services and Regulatory Affairs at AstraZeneca Canada Inc.
Ms. Feltmate provided a copy of Apotex’s Notice of Allegation.
Ms. De Abreu is a law clerk at Smart & Biggar.
Ms. De Abreu provides certain documents as exhibits.
 Respondent filed the affidavit evidence of the following Expert Witnesses: Dr. Heathcock, Dr. Collicott, Dr. Caldwell, Dr. Mayersohn and Dr. Myerson. Affidavits from the following fact witnesses were filed: Dr. Batey, Dr. Bihovsky and Ms. Ebdon.
Dr. Heathcock is currently the Emeritus Professor at the University of California at Berkeley and Chief Scientist of the Berkeley branch of the California Institute for Quantitative Biosciences. He obtained a Bachelor of Science from Abilene Christian College, Texas, in 1958 and a Ph.D. in Organic Chemistry from the University of Colorado in 1963. His research focuses on the development of new synthetic and natural products in chemistry.
Dr. Heathcock was asked: to describe POSITA to whom the Canadian ‘653 patent is addressed; to comment on the ‘653; to give a background on racemates and separation techniques; and to comment on various affidavits of Applicants’ witnesses.
analysis, stability studies, etc. He is an analytical chemist and has worked at Glaxo Group Research Ltd., OSI Pharmasceuticals (UK) Ltd. as well as other companies. He received his Ph.D. in 2002 from Open University.
Dr. Collicot was asked: to describe POSITA to whom the Canadian ‘653 patent is addressed; to comment on the ‘653; to give a background on chromatography and the separation of enantiomers; and to comment on various affidavits of Applicants’ witnesses.
England, since 2002. He was also appointed a Pro-Vice Chancellor of the University in 2007. He received a Bachelor of Pharmacy in 1969 from the University of London and a Ph.D. in biochemistry in 1972. In 1987, the University of London awarded him the degree of Doctor of Science (DSc) in pharmacology, for distinctions in drug metabolism.
Dr. Caldwell was asked: to provide a technical primer on issues of stereochemistry, pharmaceutics, pharmacokinetics and metabolism as would be know by the POSITA as of December 1994 and as of May 1993; to comment on the ‘653; and to comment on Apotex’s allegations of invalidity of the ‘653 patent, particularly lack of invention.
University of New York at Buffalo in 1971.
Dr. Mayersohn was asked: to describe the POSITA to whom the Canadian ’653 patent is addressed; to comment on the ‘653 patent; and to comment on Apotex’s allegations of invalidity of the ‘653 patent, particularly lack of utility and lack of sound prediction.
Dr. Myerson is currently the Philip Danforth Armour Professor of Engineering, in the Department of Chemical and Biological Engineering at the Illinois Institute of Technology in Chicago. He obtained a Bachelor of Science in chemical engineering in May 1973 and Masters and Ph.D. degrees in chemical engineering from the University of Virginia in January 1975 and January 1977, respectively. He is a registered Professional Engineer in New York and Ohio. His research focuses on crystallization from solution.
Dr. Myerson was asked: to give a background on crystals and crystallization as the POSITA who have known on May, 28, 1993 and December 8, 1994; to describe the POSITA to whom the Canadian ’653 patent is addressed; to comment on the ‘653 patent; and to comment on the prior art as it pertains to statements made in the affidavits of Applicants’ witnesses.
Dr. Batey is currently a Professor of Chemistry and the Associate Chair of Undergraduate Studies at the University of Toronto. In 1992, he received a Ph. D. in chemistry from the Imperial College of Science, Technology and Medicine in London.
Dr. Batey performed an analysis using HPLC on two samples of solid material provided by Respondent in order to determine the enantiomeric excess of each sample.
Dr. Bihovsky is an organic chemist. In 2001, he founded Key Synthesis LLC, a chemistry laboratory that performs contract research for pharmaceutical and biotechnology companies, process research, and consulting work in synthetic organic chemistry and medicinal chemistry. He obtained a Ph.D. in chemistry at the University of California Berkeley in 1977.
Dr. Bihovsky was asked to repeat Examples 5 and 6 in the DE 455 patent as a POSITA would have done on May 28, 1993.
Ms. Ebdon is a law clerk employed by Goodmans LLP.
Ms. Ebdon produced many of Apotex’s documentary exhibits.
and physical chemistry in 1970 from the University of Illinois.
Dr. Byrn was asked to comment on the Apotex’s allegations of non-infringement of Canadian ‘653 patent. In particular, Apotex's assertions that Claim 3 of the '653 Patent will not be infringed because Apotex’s product is not in a crystalline form.
 Shufeng Lui is an analytical chemist at Apotex whose mandate was to ship samples to Dr. Bihovsky.
 Ms. Michele Cossette is a second year student at the laboratory of Dr. Batey. She signed for the shipment and gave it to Dr. Batey’s laboratory.
 Farhad Nowrouzi is a third year student at the laboratory of Dr. Batey. He signed for the shipment and gave the bottle received of racemic omeprazole to Dr. Batey.
 Dr. John Hems is the Director, Regulatory Affairs, Canada, for the Respondent, Apotex Inc. He provided an affidavit dealing with Apotex’s ANDS submission history.
 Ms. Rosa Rahimpour is a scientist employed in the Toronto offices of Goodmans LLP. She was involved with tracking the shipments from Dr. Bihovsky.
 No party raised an objection as to the expert evidence of the other party as being properly tendered as expert evidence nor were the qualifications or expertise of such witnesses seriously questioned. I accept, therefore, such evidence as expert evidence.
4. Copy of a scientific article by Erlandsson et al entitled “Resolution of enantiomers of esomeprazole…” appearing in Journal of Chromatography, published in 1990, section 532, no. 2, November 16, 1990, pages 305 – 313 (the Erlandsson article) as appears in the Record at pages 1386 to 1402.
 No witnesses appeared before me in person. Transcripts of their cross-examinations were provided. I have no basis for finding that any witness should be considered to lack credibility. Some arguments were raised as to hearsay, which I will deal with below.
· Paragraphs 32 to 36 of the Larsson affidavit, pages 230 and 231 of the Record.
 Each of the above passages are objected to by Apotex on the basis that the witness is attesting that certain scientific work was carried out and certain results were achieved or not achieved however, that work was not done by the person swearing the affidavit, but by someone else.
 AstraZeneca replies by saying that the work was supervised by and done in conjunction with the person swearing the affidavit, and done in the normal course of the duties of the affiant and the persons carrying out those tasks. AstraZeneca points to evidence tendered by Apotex’s witness Dr. Bihovsky, where certain tests were conducted by others and accepted by Dr. Bihovsky. AstraZeneca does not object to that evidence.
 I have read the portions of the affidavits objected to and the portions of the transcripts of the cross-examination of those witnesses. I have no hesitation in ruling inadmissible paragraph 37 of the Senn-Bilfinger affidavit in which he speaks about certain results recorded in Dr. Kohl’s notebook, as it is clear from the answers he gave during his cross-examination at pages 14 to 16, 40 to 46 and 54 to 57, that he knew nothing of the Kohl notebook in question or what is recorded there.
pages 43 to 45, and portions of Niman’s notebook) satisfy me that AstraZeneca’s representation of the facts is correct, those affiants did supervise the work done by others in the normal course of the duties of each of them.
 Apotex relies on Rule 81 of this Court to state that affidavit evidence shall be confined to facts within the personal knowledge of the deponent. It also relies on the decision of the Federal Court of Appeal in Canadian Tire Corporation Limited v. P.S. Partsource Inc., 2001 FCA 8 in arguing that while a Court may relieve a party from the obligations of Rule 81, it must do so by way of a motion brought before the hearing with a showing that the evidence is reliable and necessary. The decision of Mosely J. of this Court in Pfizer Canada Inc. v. Apotex Inc. (2007), 61 C.P.R. (4th) 305, at paragraphs 112 to 115 is to the same effect.
 I am guided by Sopinka, Lederman& Bryant “The Law of Evidence in Canada”, 3rd ed., LexisNexis in dealing with Apotex’s objection. At pages 269 and 270 of Sopinka, there is a discussion respecting the flexible approach that a Court must take in looking at objections of this sort. The Court should not be pigeon-holed by a set of rules respecting reliability and necessity. Flexibility does not mean that admissibility is limitless, but the Court must be guided by the circumstances of each case. At pages 283 to 291 of Sopinka, there is a discussion as to the common law rule respecting admissibility of business records. There is such a rule to the effect that business records made in the ordinary course contemporaneously with the events, without motive or interest to misstate the facts, are admissible. To some extent, this rule was at one time hampered by a requirement that the person making the record be deceased, but this appears no longer to be the case. To a large extent the matter may be overshadowed by statutes respecting admissibility of business records; but those statutes do not eliminate the common law rule. The common law rule remains such that a Court, in the circumstances of each case before it, on a flexible basis, may admit evidence of the kind at issue here.
 Having reviewed the remaining evidence, I find that it relates to work done in the ordinary course of the duties of the persons recording it, the records were made contemporaneously, and I find no reason to believe that there was falsification or any motive or interest to falsify what was recorded. I hold that the evidence at issue, except as to Senn-Bilfinger, as aforesaid, is admissible.
 At issue is Canadian Letters Paten No. 2,139,653 (the ‘653 patent). That patent, entitled “Optically Pure Salts of Pyridinylmethyl Sulfinyl – IH – Benzimidazole Compounds” was issued and granted to AstraZeneca Aktiebolag on July 10, 2007. The application for that patent was filed in the Canadian Patent Office on May 27, 1994, thus the term of the patent, provided all maintenance fees are paid and the patent is not expunged, will expire twenty years from that date, May 27, 2014. The application claims priority from an application filed in Sweden on May 28, 1993. The application was laid open and available to the public (publication date) on December 8, 1994. Per Lindberg and Sverker von Unge, both of Sweden, are named as inventors.
 Since the application for the patent was filed with the Canadian Patent Office after October 1, 1989, the “new” provisions of the Patent Act apply to the application and the patent.
 The parties have agreed that the “claim date” relevant for the determination of some of the matters put in issue is the priority filing date - May 28, 1993.
a) Who is the person skilled in the art to whom the patent is addressed?
b) What was the state of the art at the relevant time?
c) What was the problem that the patent addresses?
d) What is the solution offered to that problem by the patent?
e) What is the proper construction of claim 8?
f) Who bears the burden of proof?
The present invention is directed to new compounds with high optical purity, their use in medicine, a process for their preparation and their use in the manufacture of pharmaceutical preparation. The invention also relates to novel intermediates in the preparation of the compounds of the invention.
 In the Background discussion that follows, it is stated that the patent deals with omeprazole; and more particularly, one of its enantiomers, esomeprazole, all of which is part of the prior art. The patent thereafter states that it deals particularly with an improved process for making very pure esomeprasole, and very pure esomeprazole itself.
crystals and crystallization. The person of ordinary skill in the art would also include pharmacologists with experience in pharmacokinetics and metabolism.
103. I have been asked to comment on the education and experience of a skilled person to whom the ‘653 patent is addressed. Based on my reading of the ‘653 patent, the skilled person to whom this patent is addressed would include a person or persons having an M.S. or a B.X. degree in organic, analytical, medicinal or pharmaceutical chemistry, plus 3 to 5 years work experience in techniques relating to separation and purification of organic/pharmaceutical molecules, or having a Ph.D. degree in organic, analytical, medicinal or pharmaceutical chemistry having experience in separation and purification of organic/pharmaceutical molecules.
 In cross-examination, particularly in answer to questions 337 to 341 (pages 6317 – 6318 of the Record) Dr. Andersson agreed that such a person would also be involved in pharmakinetics and pharmacology. Therefore, his view of a person of ordinary skill in the art essentially coincides with that of Dr. Myerson, whose definition I accept and adopt as appropriate for a POSITA respecting the ‘653 patent.
38 In dealing with individual cases, the Court must guard against making too fine a distinction as to identifying the "ideal" POSITA. Counsel for each party will argue meanings and shades of meanings most favourable to their case and the witness(es) they present. Each Counsel will argue that their witness(es) best fit the description of the ideal POSITA while there are numerous shortcomings with each of the witness(es) for the opposing party.
40 To require fine precision and ranking of voices is to place a series of "trip wires" upon which a Court may be expected to stumble or risk sanctions by a higher Court. There must be some generalized treatment of the question of defining a POSITA and a level of generalization applied.
 In this regard, one may start with what the ‘653 patent says that the state of the art was. Statements made in a patent as to the state of the art are binding on the patentee (Whirlpool Corp. v. Camco Inc. (1997), 76 C.P.R. (3rd) 150 at page 186 (F.C.) aff’d (1999), 85 C.P.R. (3rd) 129 (F.C.A.) and  2 S.C.R. 1067; Shire Biochem Inc. v. Canada (Minister of Health) (2008), 67 C.P.R. (4th 94 at para. 24 (F.C.A.).
The compound 5-methoxy-2-[[(4-methoxy-3.5-dimethyl-2-pyridinl)methyl]sulfinyl]-1H-bensimidazole, having the generic name omeprazole, and therapeutically acceptable alkaline salts thereof are described in EP 5129 and EP 124 495, respectively.
The separation of the enantiomers of omeprazole in analytical scale is descried in e.g. J. Chromatography, 532 (1990), 305-19(Erlandsson) and in a preparative scale in DE 4035455.
The latter has been done by using a diastereomeric ether which is separated and thereafter hydrolysed in an acidic solution. Under the acidic conditions needed for hydrolysis of the attached group, omeprazole is quite sensitive and the acid has to be quickly neutralized with a base to avoid degradation of the acid-sensitive compound. In the above mentioned application this is done by adding the reaction mixture containing concentrated sulphuric acid to a concentrated solution of NaOH. This is disadvantageous because there is a great risk of locally reaching pH values between 1-6 which would be devastating for the substance. Moreover, instantaneous neutralisation will create heat which will be difficult to handle in large scale production.
16. The ‘653 patent describes particular base addition salts of the enantiomers of omeprazole, their preparation, and their use as proton pump inhibitors of the generation of stomach acid. The ‘653 patent also cites references for the separation of the enantiomers on both analytical and preparative scales. Skilled persons reading the ‘653 patent already were aware that omeprazole and its two individual enantiomers were proton pump inhibitors.
115. Skilled persons were motivated to resolve omeprazole to its enantiomers and study their respective properties – Omeprazole was a drug that was known to be racemic. It was also known that both of its enantiomers were active as PPIs. It was also known that the two enantiomers of omeprazole might be metabolized differently.
93. I have described some of the techniques available for separation and isolation of enantiomers. However, there are many different methods available, each of which has a number of different parameters and conditions that can be varied. Before attempting separation of a particular enantiomeric mixture, a skilled person would not know that the enantiomers could be separated and which methods, conditions and parameters to choose in order to be successful. Thus, the skilled person would be faced with a large number of possible approaches.
A. -- but simply looking at it and saying: Oh, it’s very difficult… is not a reason. Attempt is what’s required.
· Omeprazole, including its salts, was a well known “blockbuster” drug useful in the treatment of gastric acid related conditions.
· It was known that omeprazole was racemic and comprised two enantiomers.
· At least two known successful attempts at separating omeprazole into its enantiomers had been published - the Elandsson article and DE ‘455.
· Both enantiomers were useful in treating gastric acid conditions.
· The separation of omeprazole into its enantiomers was not an easy task.
It is desirable to obtain compounds with improved pharmakinetic and metabolic properties which will give an improved therapeutic profile such as a lower degree of interindividual variation. The present invention provides such compounds, which are novel salts of single enantiomers of omeprazole.
 The patent, as previously noted, discusses the processes described in the Erlandsson article and DE ‘455. It does not say anything about the Erlandsson article other than that is describes an “analytical” scale process. The patent says that the DE ‘455 process is subject to localized pH issues and heat problems which make large-scale production difficult.
6. Despite the considerable success of omeprazole, it had some shortcomings, in particular interpatient variability, meaning that the drug (and other first-generation proton pump inhibitors (PPI’s) failed to suppress and/or sustain inhibition of acid production in some patients, and certain drug-drug interactions. These failings motivated Hassle to seek a new PPI with improved efficacy by producing greater acid suppression in a greater number of patients.
97. As discussed previously, omeprazole was known to exhibit variation between individuals in (1) its therapeutic effect and (2) AUC, as was reported by Andsersson 1990 (Apotex document 11), Regardh (Apotex document 10) and Sohn (Apotex document 32). First omeprazole had shown a significant degree of variation in treatment effect, or pharmacodynamic responsiveness based on measurements of gastric acid secretion. Second, PMs showed much greater AUC of omeprazole as compared to Ems, the rest of the population. It was known that about 3% of the Caucasian population and 15-17% of Chinese were PMs (summarized in Andersson 1992 (Apotex document 29)).
144. The mechanism suggests that the two enantiomers of omeprazole are inactive. The mechanism also suggests that the acid-mediated conversion of the two omeprazole enantiomers to the achiral sulfenamide occurs at the same rate. This was demonstrated experimentally by in vitro testing on the effects of omeprazole and its enantiomers on acid production in isolated rabbit gastric glands. (Erlandsson et al. at page 318).
145. In view of the mechanism of action of omeprazole, a skilled person would expect each enantiomer to have the same activity as the racemate. The skilled person would appreciate that the mechanism of action provides no incentive to obtain either enantiomer.
21. It was believed, based on the mechanism of action of omeprazole, that omeprazole enantiomers would have the same pharmacological activity at the active site. As described above, inhibition at the active site is caused by the action of achiral sulfenamide. Upon entering the acidic environment of the canalfouli of the parietal cells, both enantiomers form the achiral sulfenamide at the same rate.
36. Racemization is the conversion of a single enantiomer, through mixtures of the two enantiomers, to the racemic compound, a 50:50 mixture termed the racemate. Sulfoxides [R(SO)R] are chiral when the two “R” groups are different as in [R(SO)R’], the sulphur becoming a stereogenic centre bearing four different attachments (R, R’, O and a pair of electrons). Racemization of sulfoxides commonly occurs by reversibly detaching and reattaching either of the R or R’ groups or by oxidation to the corresponding sulfone ([R(SO2)R’], in which the sulphur is no longer stereogenic, followed by reduction back to the sulfoxide. The skilled person would realize that omeprazole is particularly prone to the former racemisation process the nature of which facilitates the formation of the racemate. (Tab 4 in Schedule E Apotex’s Notice of Allegation).
MR. BRODKIN: That’s fair, and you’re asking as of May 1993?
201 Q. Examples of what?
A. Of racemisation, of column racemisation. I mean, it says it’s not been extensively considered. I mean, some people have looked at it, I know.
A. Some people have had individual compounds that have racemized on columns.
203 Q. Any – do you disagree with anything else or do you wish to comment on anything else in that passage?
A. I think I generally agree that it’s something that you have to bear in mind, that there is a possibility that compounds can racemize on that column.
 Thus, the ‘653 patent seeks to address the effective separation of omeprazole into its enantiomers. The patent does not say, however, that in so doing, interpatient variability will be addressed in some improved way.
The present invention in a further aspect provides a novel method of preparing the novel compounds of the invention in large scale. This novel method can also be used in large scale to obtain single enantiomers of omeprazole in neutral form.
There is no example known in the prior art of any isolated or characterized salt of optically pure omeprazole, i.e. single enantiomers of omeprazole in either of any isolated or characterized salt of any optically pure omelprazole analogue.
With the expression “optically pure Na+ salts of omeprazole” is meant the (+)-enantiomer of omeprazole Na-salt essentially free of the (-)-enantiomer of omeprazole Na-salt and the (-)-enantiomer essentially free of the (+)-enantiomer, respectively. Single enantiomers of omeprazole have hitherto only been obtained as syrups and not as crystalline products. By means of the novel specific method according to one aspect of the invention by preparing the single enantiomers of omeprazole, the salts defined by the present invention are easy to obtain. In addition, the salts, however not the neutral forms, are obtained as crystalline products. Because it is possible to purify optically impure salts of the enantiomers of omeprazole by crystallisation, they can be obtained in very high optical purity, in some instances > 99.8% enantiomeric excess (e.e.) even from an optically contaminated preparation. Moreover, the optically pure salts area stable towards racemisation both in neutral pH and basic pH, which was surprising since the known deprotonation at the carbon atom between the pyridine ring and the chiral sulphur atom was expected to cause racemisation under alkaline conditions. This high stability towards racemisation makes it possible to use a single enantiomeric salt of the invention in therapy.
The specific method of preparation of the single enantiomers of omeprazole is a further aspect of the invention as mentioned above and it can be used to obtain the single enantiomers of omeprazole in neutral form (sic) as well as the salts thereof.
The compounds according to the invention may be used for inhibiting gastric acid secretion in mammals and man. In a more general sense, the compounds or the invention may be used for the treatment of gastric acid-related diseases and gastrointestinal inflammatory diseases in mammals and man, such as gastric ulcer, duodenal ulcer, reflux esophagitis and gastritis. Furthermore, the compounds may be used for treatment of other gastrointestinal disorders where gastric antisecretory effect is desirable e.g. in patients on NSAID therapy, in patients with gastrinomas, and in patients with acute upper gastrointestinal bleeding.
 The process is described in detail at pages 5 to 8 of the ‘653 patent, and the formulation of the resulting product and its dosage forms at pages 8 and 9. Eleven examples follow at pages 9a to 17. From pages 17 to 21, various pharmaceutical formulations are exemplified.
The stability of the optically pure compounds of the invention towards racemisation has been measured at low concentrations in refrigerator in aqueous buffer solutions at pH 8, 9.3, 10 and 11.2. The stereochemical stability was measured by comparing the optical purity for the (-)-isomer of 5-methoxy-2-[[(4-methoxy-3, 5-dimethyl-2-pyridinyl)-methyl]sulfinyl]-1H-benzimidazole in buffer solution immediately after dissolving and after several days. The measurement was performed by chromatography on an analytical chiral column. The surprising high stereochemical stability in alkaline conditions for the compounds of invention is exemplified by the fact that no racemisation for the test compound was obtained at pH 11.2 even after 21 days. At pH 8, 9.3 and 10, the chemical degradation of the compound is more apparent which makes the racemisation measurement more difficult to perform, however at none of these pH values a detectable racemisation was obtained after 16 days.
In another racemisation experiment with the optically pure compounds of the invention, an aqueous phosphate butter solution (pH=11) of the (+)-isomer of 5-methoxy-2-[[(4-methoxy-3, 5-dimethyl-2-pyridinyl)-methyl]sulfinyl]-1H-benzimidazole (c=10.5M) was warmed for 26 hours at 37°C without any racemization at all being observed.
 Thus, the solution presented is an improved process for preparing a highly optically pure omeprazole enantiomer of omeprazole and its salts, which is stable as against racemisation. Omeprazole, and its salts, can be formulated into pharmaceutical preparations. There is no information as to whether these pharmaceutical preparations made from purified enantiomers are more or less effective than omeprazole itself, or whether the issue of interpatient variability is addressed by the enantiomer so produced. There is no discussion as to how a particular purity level affects the therapeutic utility of the final product.
1. An optically pure compound characterized in that the compound is a Na+, Mg2+, Li+, K+, Ca2+ or N+(R)4 salt of (-)-5-methoxy-2-[[(4-methoxy-3, 5-dimethyl-2-pyridinyl) methyl]-sulfinyl]-1H-benzimidazole, where R is an alkyl group with 1-4 carbon atoms.
2. A compound according to claim 1 characterized in that it is in solid state form.
3. A compound according to claim 2 characterized in that it is in crystalline form.
4. A compound according to claim 1, 2 or 3 characterized in that it is a Na+, Mg2+, Li+, K+, Ca2+ or N+(R)4 salt of (-)-5-methoxy-2-[[(4-methoxy-3, 5-dimethyl-2-pyridinyl) methyl]-sulfinyl]-1H-benzimidazole.
5. A compound according to claim 1, 2 or 3 characterized in that it is the Mg2+ salt of (-)-5-methoxy-2-[[(4-methoxy-3, 5-dimethyl-2-pyridinyl) methyl]-sulfinyl]-1H-benzimidazole.
6. A compound according to claim 1 characterized in that it is the Na+ salt of (-)-5-methoxy-2-[[(4-methoxy-3, 5-dimethyl-2-pyridinyl) methyl]-sulfinyl]-1H-benzimidazole in its crystalline form.
8. A compound according to any one of claims 1 to 6 having an optical purity of 99.8% or greater.
1. What is the meaning of “having an optical purity of 99.8% or greater?
2. Is there implicit in claim 8 a promise of utility, and what is that promise?
…As I have noted above, “optical purity” per se is sometimes used to express purity in absolute terms, thus an optical purity of 98% or greater could refer to a material in which there is 98% or more esomeprazole and no more than 2% (+)-omeprazole. Also as noted, optical purity can be understood to mean purity in terms of enantiomeric excess (as, for instance, in Examples 1 to 5 of the ‘653 patent, which describe the optical purities of the sodium and magnesium salts of esomeprazole and (+)-omeprazole in terms of “optical purity (e.e.)”).
11. Just as a compound may be more or less chemically pure, it may be more or less optically pure. Optical purity refers to the degree of purity of a sample of one enantiomer relative to the presence of the other enantiomer. It can be expressed as absolute purity or enantiomeric purity (the percentage of the particular enantiomer in the sample) or as enantiomeric excess (also written “ee”; representing the difference between the amount of the particular enantiomer of interest and the other enantiomer).
 To address the way things are expressed when claim 8 uses the term “optical purity” of 99.8%; if that expression means absolute purity, then there are two enantiomers present, the (-) or S (es) enantiomer comprises 99.8% and the (+) enantiomer 0.2%. If the expression means enantiomeric excess (ee), that means there is 99.8% more of the (-) enantiomer than of the (+) enantiomer. To do the math, 99.6% (ee) means 99.8% absolute.
 As it turns out, the other issues in this case do not turn on whether the purity is expressed one way or the other; however, the meaning of other claims not at issue here may depend on that expression.
 The arguments for the parties are simple. AstraZeneca argues that throughout the description of the ‘653 patent, whenever a percentage figure is given for optical purity, it is always expressed as enantiomeric excess (ee). Each of Examples 1 though 5 express optical purity in this way. Nowhere in the description does the other way of expressing it appear. Thus, argues AstraZeneca, the informed person reading claim 8 in a purposive way would conclude that the claims was to be read in terms of enantiomeric excess (ee).
 Apotex argues that, given that there are two ways of expressing optical purity, and given that the patentee clearly knew how to express the matter one of those ways, using (ee) in the description, the other way, absolute purity, must have been intended when (ee) was omitted in the claims.
 I agree with AstraZeneca’s interpretation; 99.8% should be read as meaning optical purity expressed in terms of enantiomeric excess. A person skilled in the art in reading claim 8 would know that optical purity can be expressed as a percentage in one of two ways. That person would wish to read the claim in an “informed and purposive” way, looking at the whole of the disclosure and the claims (Whirlpool Corp. v. Camco Inc.,  2 S.C.R. 1067 at paragraph 49). In so doing, the person skilled in the art would recognize that the percentage of optical purity in claim 8 was intended to be expressed in terms of enantiomeric excess (ee).
 The second issue is whether there is implicit in claim 8 a provision as to utility. Clearly, there is nothing respecting utility expressly stated. A contrast can be made with claims 25 to 28 of the ‘653 patent which clearly state a therapeutic use.
invention is of any real benefit to the public, or particularly suitable for the purposes suggested.
…it is sufficient utility to support a patent that the invention gives either a new article, or a better article, or a cheaper article, or affords the public a useful choice.
Although (i) s. 86(1) requires the inventor to indicate and distinctly claim the part, improvement or combination which he claims as his invention and (ii) to be patentable an invention must be something new and useful (s.2), and not k known or used by any other person before the applicant invented it (s. 28(1)(a), I do not read the concluding words of s. 36(1) as obligating the inventor in his disclosure or claims to describe in what respect the invention is new or in what way it is useful. He must say what it is he claims to have invented. He is not obliged to extol the effect or advantage of his discovery, if he describes his invention so as to produce it.
 That, however, is directed to a “new compound”. Where there is a new use for an old compound, that new use must be set out in the claims (see e.g. Shell Oil Co. v. Canada (Commissioner of Patents),  2 S.C.R. 536).
 In the present case, claim 8 is not directed to a new compound; it is directed to a previously known compound having a particular purity. No particular use of that compound is expressed in the claim. Thus, so far as claim construction is concerned, we have only a known compound having a particular purity claimed. The issue of utility will arise later in considering sound prediction and utility.
4. The first person may, at its peril, rely simply upon the presumption of validity afforded by the Patent Act or, more prudently, adduce its own evidence as to the grounds of invalidity put in issue.
5. The Court will weigh the evidence; if the first person relies only on the presumption, the Court will nonetheless weigh the strength of the evidence led by the second person. If that evidence is weak or irrelevant the presumption will prevail. If both parties lead evidence, the Court will weigh all the evidence and determine the matter on the usual civil balance.
6. If the evidence weighed in step 5 is evenly balanced (a rare event), the Applicant (first person) will have failed to prove that the allegation of invalidity is not justified and will not be entitled to the Order of prohibition that it seeks.
 In the present case, Pharmascience has made extensive allegations and both parties have led evidence as to the validity of claim 5 of the ‘457 patent. Subject to the arguments raised by Merck as to whether Sound Prediction/Overbreadth was raised in the Notice of Allegation, I must decide the issue of validity before me on the weight of the evidence and arguments presented. If that weight is evenly balanced in respect of any allegation, I must find that particular allegation made by Pharmascience to be justified.
 In the present case before me, I find, on the evidence, particularly that of Doctor Russell, that because of the Harris and Thigpen papers, a researcher would be discouraged from pursuing research in that area. In other words, the “motivation” would be lost. Thus, it has been proven that the allegations that claim 5 of the ‘457 Patent was not obvious was not justified.
 Having discussed all of the above, I turn to the grounds alleged by Apotex as to invalidity.
Owing to the absence of any data or disclosure in the specification of the ‘653 Patent as to the nature and extent of the “improved pharmacokinetic or metabolic properties which will give an improved therapeutic profile such as a lower degree of interindividual variation” other than the generic statement on page 1, lines 18-22 of the specification, and as claimed in claims 28 and 29 of the ‘653 Patent, Apotex alleges that the purported filing date (May 27, 1994), any sound basis on which to predict the above noted properties for any of the purportedly novel salts of esomeprazole, including magnesium esomeprazole, over and above those that would have been expected for the previously known omeprazole, salts of omeprazole including magnesium omeprazole, and the previously known single enantiomers of omeprazole in their salt or non-salt form. Should you assert that the purported inventors did have the ability to make such a prediction based on experimental data not disclosed in the patent, Apotex further alleges that the requirement properly to disclose such data has not been met, and that the specification is therefore invalid as being insufficient, and thus contrary to subsection 27(3) of the patent Act.
(3) There must be proper disclosure.
Apotex alleges that even if components (1) and (2) of the doctrine of sound prediction has been met by the purported inventors, which is denied, that component (3), that of proper disclosure, has not been met. In particular, Apotex alleges that the general statements as to “improved pharmacokinetic or metabolic properties which will give an improved therapeutic profile such as a lower degree of interindividual variation” for the purportedly novel compounds of the invention does not amount to a proper disclosure of any such properties.
In support of this allegation, Apotex relies on the description provided in the ‘653 patent, which is devoid of any advantages to be gained through the use of the purportedly novel claimed salts of esomeprazole over those of the racemate or (+)-enantiomer. The ‘653 Patent itself notes that the most preferred compounds of the invention include the sodium and magnesium salts of both the (+)- and (-)-enantiomers.
 As discussed in respect of claim construction, a patented invention must be “new and useful”. If the invention lies in a new compound, the utility must be disclosed in the descriptive part of the patent; it may or may not be expressly included in the claims. If the invention lies in a new use for an old compound, the utility must be included in the claim.
Moreover, the optically pure salts are stable towards racemisation both in neutral pH and basic pH, which was surprising since the known deprotonation at the carbon atom between pyridine ring and the chiral sulphur atom was expected to cause racemisation under alkaline conditions. This high stability towards racemisation makes it possible to use a single enentiomeric salt of the invention in therapy.
 It is important to distinguish between the utility promised by the patent- “improved therapeutic profile, such as lower degree of interindividual variation” “and the particular property that makes that possible “high stability towards racemisation”.
 Nowhere in the patent, whether in the Examples or otherwise, is any information given to the person skilled in the art as to whether, in fact, the highly pure esomeprazole salt does give an improved therapeutic profile such as a lower degree of interindividual variation. There is no evidence from any witness to say that there is anything in the disclosure of the ‘653 patent that would inform a person skilled in the art that the purified esomeprazole salt fulfills this promise. Counsel for AsrtaZeneca argued that all that was required was that an alternative to racemic omeprazole be provided not whether it is an improvement. This argument ignores the promise of the patent as set out in the portion recited above at page 1 that the resulting product would provide “an improved therapeutic profile”.
26. Despite a lack of interest by the company, optically pure salts of enantiomers were tested in animals.
27. The rat studies were highly surprising. First, the enantiomers were stable against racemisation, in viva. Second, the enantiomers behaved differently fro each other, in vivo. After intraduodenal administration of the sodium salts of S-omeprazole and R-omeprazole, it was observed that the enantiomers were metabolized at substantially different rates and had substantially different bioavailabilities, which correlated to different (but not statistically significant) gastric acid output.
28. Given these findings, the enantiomers were further tested, next in an in vitro human model in April 1993. In these studies, human liver microsomes containing CYP2C19 (i.e. corresponding to an EM) were exposed to the individual enantiomers of omeprazole. The metabolism of the enantiomers by CYP2C19, measured by tracking the levels of the corresponding 5-hydroxy omeprazole metabolite, differed by an order of magnitude between the enentiomers, with CYP2C19 metabolizing R-omeprazole 10 times more readily than esomeprazole.
[T]he patent…claims more than a molecule with a chemical formula. Rather, the claims describe several or many compounds, and several compositions, and specific uses for them, all aspects of the same invention. Elalapril may be the essence of each claim, but the claims, and the patent for the invention, are more than the chemical molecule of enalpril or of enalapril maleate.
Inherent in the compound, and indeed in the patent, is the purpose and utility of the compound of enalapril.
 Given that the ‘653 patent promises utility in terms of improved therapeutic properties such as less interindividual variation, and given that at the time of the priority filing date of the application - and even as of the Canadian filing date there were no conclusions […] - let alone any publicly available conclusions – did the invention have a basis for a “sound prediction” as to utility?
70 The doctrine of sound prediction has three components. Firstly, as here, there must be a factual basis for the prediction. In Monsanto and Burton Parsons, the factual basis was supplied by the tested compounds, but other factual underpinnings, depending on the nature of the invention, may suffice. Secondly, the inventor must have at the date of the patent application an articulable and "sound" line of reasoning from which the desired result can be inferred from the factual basis. In Monsanto and Burton Parsons, the line of reasoning was grounded in the known "architecture of chemical compounds" (Monsanto, at p. 1119), but other lines of reasoning, again depending on the subject matter, may be legitimate. Thirdly, there must be proper disclosure. Normally, it is sufficient if the specification provides a full, clear and exact description of the nature of the invention and the manner in which it can be practised: H. G. Fox, The Canadian Law and Practice Relating to Letters Patent for Inventions (4th ed. 1969), at p. 167. It is generally not necessary for an inventor to provide a theory of why the invention works. Practical readers merely want to know that it does work and how to work it. In this sort of case, however, the sound prediction is to some extent the quid pro quo the applicant offers in exchange for the patent monopoly. Precise disclosure requirements in this regard do not arise for decision in this case because both the underlying facts (the test data) and the line of reasoning (the chain terminator effect) were in fact disclosed, and disclosure in this respect did not become an issue between the parties. I therefore say no more about it.
71 It bears repetition that the soundness (or otherwise) of the prediction is a question of fact. Evidence must be led about what was known or not known at the priority date, as was done here. Each case will turn on the particularities of the discipline to which it relates. In this case, the findings of fact necessary for the application of "sound prediction" were made and the appellants have not, in my view, demonstrated any overriding or palpable error.
 The facts of the present case do not show that as of the priority date, May 1993, or even the Canadian filing date, May 1994, that the inventors had either a factual basis for a prediction that esomeprazole salt of a particular purity would have the utility indicated in the patent, nor did they have an articulable and sound line of reasoning for referring such a result. Clearly, there was no proper disclosure in the patent in that respect.
 I find that Apotex’s allegation that claim 8 is invalid for lack of sound prediction for insufficient support as to utility is justified.
 German patent application DE 40 35 455 A1 (De’455) was laid open (made available to the public) May 14, 1992; that is, more than one year before the priority date of the patent application for the ‘653 patent at issue here, and more than two years before the filing date of the Canadian application for the ‘653 patent. As such it is a proper reference for purposes of anticipation from a date point of view.
compounds can be employed as active ingredients to treat gastric disorders.
Pyridylmethylsulphinyl-1H-benzimidazoles can be resolved into their optical antipodes for the first time by the process according to the invention. The fact to be judged as particularly surprising here is that the liberation of the optically pure compounds from the diastereomers is carried out with the aid of highly concentrated mineral acids, although it is known that the pyridylmethylsulphinyl-1H-benzimidazoles are very acid-liable compounds.
The compounds prepared according to the invention are employed as active ingredients in medicaments for the treatment of gastric and intestinal disorders. Reference is made, for example, to European patent 166 287 with respect to the manner of use and dosage of the active ingredients.
 A process for arriving at these optically pure compounds is described. Essentially, a second position is created in the molecule about which a further stereocentre exists so that with a further twist of the stereoisomers, a diastereomer is made as an “intermediate” compound. The diastereomer is more easily separable, and converted back to the isomers. Example 5 at page 12 shows the making of the diastereomers of esomeprazole, which are described as colourless crystals with a melting point of 161ºC. Example 6, using the process of Example 2, converts the diastereomers to the (+) enantiomer of omeprazole. No melting point nor any particular purity is reported.
There are processes for resolution of different substituted 2-(2-pyridinylmethylsulphinyl)-1H-benzimidazoles disclosed in the prior art. Such resolution processes are for example described in DE 403,5455 and WO 94/27988. These processes involve synthetic steps wherein a diastereomeric mixture is synthesized from the racemate of the corresponding substituted 2-(2-pyridinylmethylsulphinyl)-1H-benzimidazoles. The diastereomers are then separated and finally one of the separated diastereomer is converted to the optically pure sulphoxide in a hydrolytic step.
1) The substituted 2-(2-pyridinylmethylsulphinyl)-1H-benzimidazole, as a racemic intermediate, hs to be further processed in a coupe of reaction steps before the single enantiomers can be obtained.
3) There is a large waste of highly refined material when the unwanted stereoisomer in the form of the opposite diasteromer is separated and discarded.
 The point to be made in this regard is that the inventors named in the ‘653 patent themselves have publicly acknowledged that DE ‘455 discloses the separation of the enantiomers of omeprazole, albeit using a complex process in which there is a great deal of waste. They describe the resulting enantiomers as “optically pure”.
· The skilled person would not at once perceive or understand that DE 455 describes (-)-omeprazole or any alkaline salts with optical purity of 99.8% or greater ee.
· DE 455 does not express optical purity numerically. This is undisputed.
· Although DE 455 refers to the compounds as “optically pure”, there is no discussion or description in DE 455 of the term. This is also undisputed.
· DE 455 does not provide any measurement of optical purity. This is also undisputed.
88. While a skilled person would understand by convention that the term “optically pure” in the ‘455 patent application suggests 95% or more enantiomeric purity (90% enantiomeric excess), without any method or evidence being specified, the claim is without substance.
 Apotex argues that Dr. Davies did not read “optically pure” as part of the whole of the phrase in which it is used in DE ‘455, namely, “configurationally homogeneous, optically pure”. I have read Dr. Davies’ cross-examination on the point and find no reason that would suggest that this would have made a difference. Apotex offered no evidence of its own as to what “optically pure”, with or without the modifier, “configurationally homogeneous”, would have meant to a person skilled in the art in 1993.
 Thus, what DE ‘455 discloses, as may be relevant to claim 8, is the (+) enantiomer of omeprazole useful in treating gastric problems having an “optical purity” of at least 90% (ee). The parties made no issue that to disclose the (+) enantiomer is to disclose equally the (-) enantiomer of esomeprazole. Further, no serious argument was raised as to the salts of omeprazole and enantiomers as DE ‘455 also discloses the salts (page 2, line 19; page 10, line 2).
23 For the reasons that follow, and in light of recent jurisprudence, I am of the respectful opinion that the applications judge overstated the stringency [page279] of the test for anticipation that the "exact invention" has already been made and publicly disclosed.
· If I may summarise the effect of these two well-known statements [from General Tire and Hills v. Evans], the matter relied upon as prior art must disclose subject matter which, if performed, would necessarily result in an infringement of the patent... . It follows that, whether or not it would be apparent to anyone at the time, whenever subject matter described in the prior disclosure is capable of being performed and is such that, if performed, it must result in the patent being infringed, the disclosure condition is satisfied.
When considering the role of the person skilled in the art in respect of disclosure, the skilled person is "taken to be trying to understand what the author of the description [in the prior patent] meant" (para. 32). At this stage, there is no room for trial and error or experimentation by the skilled person. He is simply reading the prior patent for the purposes of understanding it.
27 Once the subject matter of the invention is disclosed by the prior patent, the person skilled in the art is assumed to be willing to make trial and error experiments to get it to work. While trial and error experimentation is permitted at the enablement stage, it is not at the disclosure stage. For purposes of enablement, the question is no longer what the skilled person would think the disclosure of the prior patent meant, but whether he or she would be able to work the invention.
30 Two questions now must be answered: (1) what constitutes disclosure at the first stage of the test for anticipation, and (2) how much trial and error or experimentation is permitted at the enablement stage?
33 What amount of trial and error or experimentation is permitted before a prior disclosure will not constitute enabling disclosure? Certainly, if the applications judge finds that an inventive step was required to get to the invention of the second patent, the specification of the first patent will not have provided enabling disclosure. But even if no inventive step is required, the skilled person must still be able to perform or make the invention of the second patent without undue burden.
 Thus, the question here is, given that DE ‘455 describes a process for separating the enantiomers of omeprazole (and salts) into “optically pure” fractions, does the description, particularly Examples 5 and 6 (incorporating Examples 1 and 2) “enable” what is claimed in claim 8, a purity of 99.8% (ee) or greater?
 There was considerable procedural wrangling before this matter was heard as to whether certain evidence could be filed and whether AstraZeneca could file certain reply evidence. However, as the Record has emerged, the Court has in evidence as provided by Apotex of certain experiments conducted by Dr. Bihovsky where he purports to replicate Examples 5 and 6 of DE ‘455 as it would have been done in 1993, and Dr. Batey, who analyzed the resulting samples. AstraZeneca has filed the evidence of Dr. Larsson, who testified as to certain tests conducted by AstraZeneca in 1993, which he says failed to produce results. AstraZeneca also filed the evidence of Dr. Kohl and Dr. Senn-Bilfinger, the persons named as inventors in DE ‘455, attesting as to the results that were obtained at the time they performed the work exemplified in Examples 5 and 6.
 In dealing with whether DE ‘455 enabled a person skilled in the art to made 99.8% (ee) pure esomeprazole, Apotex submitted the evidence of Drs. Bihovsky and Batey, both as fact witnesses. Each was cross-examined.
 AstraZeneca filed evidence from the two persons named as inventors of DE ‘455, Drs. Kohl and Senn-Bilfinger, as well as evidence from Dr. Larsson as to work done in 1993 at AstraZeneca by Dr. Niman in an endeavour to replicate DE ‘455.
 The evidence of Drs. Bihovsky and Batey is, essentially, that Dr. Bihovsky prepared samples in accordance with the examples of DE ‘455 which were forwarded to Dr. Batey for analysis as to purity. Dr. Batey analyzed two samples; one he found to have a purity (ee) of 99.6% + 0.1; the other, he found to have a purity (ee) of 99.7% + 0.1. The latter sample, therefore, would come within the limit set by claim 8 of 99.8%, given the standard deviation of + 0.1% (Batey affidavit, paragraphs 34 and 40, Record, pages 5183 – 5184).
 No question has arisen concerning Dr. Batey’s analysis of the samples. AstraZeneca challenges the work of Dr. Bihovsky, who made the samples. These challenges, however, do not arise from any evidence tendered by witnesses; only from argument of Counsel.
· He obtained racemic omeprazole magnesium from an Apotex source, inspected and analyzed it to confirm that this is what it was.
· He converted racemic omeprazole magnesium to racemic omeprazole sodium and tested it to confirm that this is what it was.
· He prepared a (+)-fenchyl chloromethyl ether, which is needed to follow Example 5 of DE ‘455, tested it and confirmed that that is what it was.
· He repeated Example 5 (which incorporated Example 1) of DE ‘455 and obtained (+)-fenchyloxymethl-(+)-omeprazole, tested it and confirmed that is what it was.
· He repeated Example 6 (which incorporates, by reference, Example 2) of DE ‘455. In so doing, the pH was at 7 when the sodium hydroxide was added. He adjusted the pH to 8 by adding sodium carbonate. A “lilac-coloured amorphous solid” was produced, which he took to be (+)-omeprazole. Three fractions of product were obtained, two of which contained this solid. The solid was tested and confirmed to be (+)-omeprazole. This (+)-omeprazole was sent to Dr. Batey for purity analysis.
· The Examples 5 and 6 were run a second time. In running Example 6 from the product of Example 5, the initial pH this time was 1, which was adjusted in two samples with sulphuric acid and in a third sample, with phosphoric acid, to 7.5 pH. The samples from the first two (sulphuric acid) runs were not tested as they appeared to contain contamination of some kind. Samples from the third run (phosphoric acid) were retained and tested and found to contain (+)-omeprazole. These samples were sent to Dr. Batey.
· The samples taken from the first run in which Dr. Bihovsky attempted to replicate Examples 5 and 6 of DE ‘455 were tested by Dr. Batey and fell below 99.8% (ee) purity and are, therefore, irrelevant.
· From the second run, the first two attempts in which the pH was adjusted using sulphuric acid, resulted in a product that was discarded without testing. AstraZeneca characterizes this as a failure. The third attempt was made by switching to phosphoric acid, something not set out in DE ‘455.
· The samples obtained were, in any event, all impure, containing visible impurities.
 AstraZeneca further argues that the evidence of Dr. Larsson stating that his staff, in particular Dr. Niman, in 1993, when DE ‘455 became published, attempted three times to replicate Examples 5 and 6, and were unsuccessful in achieving 99.8% (ee) purity of (+)-omeprazole (Larsson affidavit, paragraphs 22 - 32; Record, pages 228 - 232).
 Finally, AstraZeneca relies on the evidence of the named inventors of DE ‘455 themselves, Drs. Kohl and Senn-Bilfinger. They made three attempts in 1990 to obtain (+)-omeprazole. Their records show that the intermediate (Example 5) was produced with a purity of 91 to 92% (ee). The intermediate was converted using the procedure of Example 6 to produce some (+)-omeprazole in the form of a brown viscous oil. Its purity was apparently not measured. (Kohl affidavit, paragraphs 70 – 104; Record, pages 147 - 150).
 Apotex, on the other hand, argues that Dr. Bihovsky’s work was that of simple trial and error of the kind expected of a person of ordinary skill in the art, and that he was successful in obtaining a sample of (+)-omeprazole within the purity specified by claim 8. Apotex argues that Dr. Bihovsky made routine adjustments in substituting phosphoric acid for sulphuric acid; Examples 6 and 2 of DE ‘455 do not specify what acid to use. They simply say to adjust the pH.
 Apotex argued that Dr. Kohl’s evidence was largely hearsay; the work was done by others – a point I have already dealt with. The analysis of the intermediate was made only recently when the sample was seventeen years old. Dr. Collicott says that the sample would have degraded over time (affidavit, paragraph 163; Record, page 5694).
 As to the work done at AstraZeneca by Dr. Niman, as testified to by Dr. Larsson, Apotex argued that this evidence is hearsay – this point has already been discussed in these Reasons. Apotex further argues, through Dr. Heathcock (affidavit, paragraphs 183 – 195; Record, pages 5753 – 5757), that Dr. Niman did not accurately follow DE ‘455; the work was done in a hurry and was substandard.
 I am satisfied, given all the evidence on the point, that those following the Examples 5 and 6 (incorporating Examples 1 and 2) of DE ‘455 could make (+)-omeprazole and could, on occasion, make it of an optical purity within the 99.8% (ee) range of claim 8 of the ‘653 patent. I am also satisfied that it was not inevitable that (+)-omeprazole of this purity could always, or even usually, be achieved. It could be achieved sometimes.
 I have no doubt that the persons named as inventors by AstraZeneca in the ‘653 patent were really seeking a better method for making omeprazole enantiomers than that disclosed in DE ‘455. They were seeking a method that could be used commercially. They seem to have done that. The process claims of the ‘653 patent are not at issue here. The question is whether the resulting product, a known product, esomeprazole, with a particularly high purity, 99.8% (ee), itself can be properly claimed as a separate claim in the patent.
 What amount of trial and error or experimentation is permitted before a prior disclosure will not constitute enabling disclosure? Certainly, if the applications judge finds that an inventive step was required to get to the invention of the second patent, the specification of the first patent will not have provided enabling disclosure. But even if no inventive step is required, the skilled person must still be able to perform or make the invention of the second patent without undue burden.
 Drawing from this jurisprudence, I am of the opinion that the following factors should normally be considered. The list is not exhaustive. The factors will apply in accordance with the evidence in each case.
1. Enablement is to be assessed having regard to the prior patent as a whole including the specification and the claims. There is no reason to limit what the skilled person may consider in the prior patent in order to discover how to perform or make the invention of the subsequent patent. The entire prior patent constitutes prior art.
2. The skilled person may use his or her common general knowledge to supplement information contained in the prior patent. Common general knowledge means knowledge generally known by persons skilled in the relevant art at the relevant time.
3. The prior patent must provide enough information to allow the subsequently claimed invention to be performed without undue burden. When considering whether there is undue burden, the nature of the invention must be taken into account. For example, if the invention takes place in a field of technology in which trials and experiments are generally carried out, the threshold for undue burden will tend to be higher than in circumstances in which less effort is normal. If inventive steps are required, the prior art will not be considered as enabling. However, routine trials are acceptable and would not be considered undue burden. But experiments or trials and errors are not to be prolonged even in fields of technology in which trials and experiments are generally carried out. No time limits on exercises of energy can be laid down; however, prolonged or arduous trial and error would not be considered routine.
4. Obvious errors or omissions in the prior patent will not prevent enablement if reasonable skill and knowledge in the art could readily correct the error or find what was omitted.
1. For there to be anticipation there must be both disclosure and enablement of the claimed invention.
2. The disclosure does not have to be an "exact description" of the claimed invention. The disclosure must be sufficient so that when read by a person skilled in the art willing to understand what is being said, it can be understood without trial and error.
3. If there is sufficient disclosure, what is disclosed must enable a person skilled in the art to carry out what is disclosed. A certain amount of trial and error experimentation of a kind normally expected may be carried out.
4. The disclosure when carried out may be done without a person necessarily recognizing what is present or what is happening.
5. If the claimed invention is directed to a use different from that previously disclosed and enabled then such claimed use is not anticipated. However if the claimed use is the same as the previously disclosed and enabled use, then there is anticipation.
6. The Court is required to make its determinations as to disclosure and enablement on the usual civil burden of balance and probabilities, and not to any more exacting standard such as quasi-criminal.
7. If a person carrying out the prior disclosure would infringe the claim then the claim is anticipated.
 What we are faced with in the present case is a piece of a prior art, DE ‘455, which discloses a process for making “optically pure” omeprazole enantiomer. On some occasions, that purity would reach 99.8% (ee); on other occasions (e.g. the first Run by Dr. Bihovsky) a lower purity was achieved. On other occasions, nothing worth the trouble of testing was achieved (Bihovsky Run 2 first two attempts; Larsson/ Niman at AstraZeneca ; Kohl/Senn-Bilfinger).
 On the basis of this evidence, I find that, to use the words of Lord Hoffman in Synthon BV v. SmithKline Beecham plc,  1 All E.R. 685,  UKHL 59, at paragraph 22, to perform DE ‘455 would not “necessarily result” in an infringement of claim 8.
 If I may summarise the effect of these two well-known statements, the matter relied upon as prior art must disclose subject matter which, if performed, would necessarily result in an infringement of the patent. That may be because the prior art discloses the same invention. In that case there will be no question that performance of the earlier invention would infringe and usually it will be apparent to someone who is aware of both the prior art and the patent that it will do so. But patent infringement does not require that one should be aware that one is infringing: 'Whether or not a person is working [an] invention is an objective fact independent of what he knows or thinks about what he is doing' (see Merrell Dow Pharmaceuticals Inc v H N Norton & Co Ltd (1995) 33 BMLR 201 at 213,  RPC 76 at 90). It follows that, whether or not it would be apparent to anyone at the time, whenever subject matter described in the prior disclosure is capable of being performed and is such that, if performed, it must result in the patent being infringed, the disclosure condition is satisfied. The flag has been planted, even though the author or maker of the prior art was not aware that he was doing so.
 I do not equate “necessarily result” with “always result” or “inevitably result”; however, given the evidence in the present case, I find that to practice DE ‘455 would at best only occasionally result in a product with the purity level stipulated in claim 8. On this basis, I find no enablement such as would support an allegation of anticipation. The allegation as to anticipation is not justified.
 The separation of omeprazole into its enantiomers was not an easy task. I have earlier in these reasdons reviewed DE ‘455, which describes a method of separating omeprazole into “optically pure” enantiomers.
 The other piece of prior art relied upon by Apotex in arguing that claim 8 of the ‘653 patent is obvious is the Erlandsson article. This article was mentioned at page 1 of the ‘653 patent as describing the separation of the enantiomers of omeprazole “in analytical scale”. No further comment is made. At page 2 line 8 the ‘653 patent describes its new invention as a method of separating the enantiomers “in large scale”.
 The Erlandsson article, at page 317 (Record, page 1400) describes that omeprazole was separated into (+) and (-) enantiomers of 82% and 95.6% (ee) purity. That is, the enantiomer of claim 8 was obtained with a 95.6% (ee) purity.
 The technique used by Erlandsson is described at the same page with reference to Fig. 8 as a “recycling” technique. This technique is commented upon by Dr. Collicott at paragraphs 29 to 37 and 97 to 141 of his affidavit (Record, pages 5663 - 5665 and 5676 - 5763) and Dr. Heathcock at paragraphs 219 to 233 (Record, pages 5764 to 5770) as routine analytical work. They opined that recycling could be carried out any number of times to reach whatever purity, as a practical matter, was desired.
 Dr. Armstrong, for AstraZeneca, at paragraphs 199 to 206 of his affidavit (Record, pages 601 – 602) describes the Erlandsson process as inefficient and producing only low yields. Dr. Davies goes further at paragraphs 132 to 138 of his affidavit (Record, pages 800 – 801) to state further that, in his opinion, the Erlandsson system could not be optimized to increase the optical purity. However, he provides no support for this opinion. I view the evidence of these two witnesses not as saying that the purity level could never be reached but as saying that it could not be done efficiently on any kind of practical scale.
 There was no serious argument raised by AstraZeneca that a person could and would be sufficiently motivated to make a salt of the esomeprzazole enantiomer (see e.g. Dr. Myerson’s affidavit, paragraph 94; Record, pages 5868 – 5869).
380 Q. The level of purity that you want for a compound depends on the use of that compound.
A. The level of purity you want for a compound depends on the intended use of the compound? Do I agree with that?
381 Q. Yes, as a general concept.
A. Yeah, I think I can agree with that. I’m just trying to think of all the possible situations where one might apply that statement, and it seems like a generally reasonable statement. If you are going to made cement out of calcium carbonate, it probably is different than if you are going to use it as an inert ingredient in a pill, for example.
388 Q. Let me ask you this, Dr. Heathcock: are you disagreeing with me that in the context of pharmaceuticals – and you know omeprazole is a pharmaceutical, correct?
389 Q. Are you disagreeing with me that in the case of pharmaceuticals, a skilled person would be motivated to make a pharmaceutical as enantiomerically pure as possible?
A. No, I don’t disagree with that.
 I am satisfied, on the evidence that, as of the claim date, May 1993, it was known that omeprazole could be separated into its enantiomers (+) and (-), that they would be useful, just as omeprazole was, in treating gastric problems and that they could be processed in salt form with a salt such as magnesium. A purity of 95.6% (ee) for esomeprazole had been reported as having been achieved by Erlandsson. I am satisfied that the technique of Erlandsson could have been used to increase that purity to 99.8% (ee) if desired. One could readily be motivated to create a purer esomeprazole than reported by Erlandsson, given that the product would be used as a pharmaceutical.
 It is not a question as to whether Erlandsson’s process was efficient or could produce large quantities of the enantiomer; it is only whether, given Erlandsson, it was obvious that one could achieve an enantiomer with 99.8% purity however inefficiently.
69 If an "obvious to try" test is warranted, the following factors should be taken into consideration at the fourth step of the obviousness inquiry. As with anticipation, this list is not exhaustive. The factors will apply in accordance with the evidence in each case.
3. Is there a motive provided in the prior art to find the solution the patent addresses?
this is no reason to exclude evidence of the history of the invention, particularly where the knowledge of those involved in finding the invention is no lower than what would be expected of the skilled person.
 There was the means and motivation to make an enantiomer of high purity such as 99.8%. This satisfies the requirements for obviousness. I find that Apotex’s allegation that claim 8 of the ‘653 patent is obvious, is justified.
 In conclusion, I find that Apotex’s allegation that claim 8 of its ‘653 patent is invalid for lack of sound prediction and to utility as for obviousness, is justified. The allegation as to anticipation is not justified. The application is, therefore, dismissed.
 As to costs, Counsel agreed that they should be awarded to the successful party at the Column 4 level. They shall work out an appropriate quantum within a reasonable time, failing which they may apply to me for directions.
 No costs will be awarded for or against the Minister, who did not actively participate in these proceedings.
FOR THE RESPONDENT, APOTEX INC.


Please note that Act 9 does not affect the Public Utilities Commission's oversight and regulation of transportation service providers.
Act 9 provides transitional rules for the conversion from the PSC tax system to the GET system. Affected taxpayers are required to file a 2001 Form U-6 (PSC tax return) for the tax year in which October 1, 2001, occurs, and pay the PSC tax payments assigned to the months of the taxable year up to September 30, 2001. 4 Act 9 contains a provision, which allows the PSC tax payments assigned to the months in the taxable year after September 30, 2001, to be abated. Instead, the actual gross income received on October 1, 2001, and thereafter, will be subject to the GET.
Any adjustments will be reflected in the taxpayer's November 2001 statement from the Department, which will be mailed out in December. Taxpayers should not submit PSC tax payments for amounts due after September 30, 2001. If a taxpayer has already submitted a payment for October, November, or December 2001, it will be reflected in the taxpayer's November statement. Any overpayment resulting from either the adjustments made by the Department or a payment made by the taxpayer for periods after September 30, 2001, will be refunded in December.
For transportation services income received after September 30, 2001, the taxpayer shall report and pay the GET on line 9 ("services including professional") of Forms G-45 (general excise/use tax periodic return) and G-49 (general excise/use tax annual return).
Under the PSC tax law, motor carriers were allowed to divide their income with another motor carrier when transportation of passengers or property was furnished through arrangements between the motor carriers. HRS §239-2. Act 9 preserves this benefit by adding a similar provision to the GET law. HRS §237-18(h).
Though Act 9 does not specifically address filing and reporting procedures for taxpayers who are operating in their first, second, or final year of operation when October 1, 2001, occurs, the Department will administer the tax law as described below.
First and second year filers are still required to file an amended Form U-6 (PSC tax return). 6 To file an amended Form U-6, a first or second year filer must compute its PSC tax liability for the taxable year through September 30, 2001, only and state this amount on the amended Form U-6. (As stated above, the taxes due for the rest of the year are abated under Act 9.) The taxpayer should then offset the amended tax liability for the year with any PSC tax payments paid through September 30, 2001, (i.e., full payment or quarterly or monthly installments); any difference will represent a balance due to the Department or a refund due to the taxpayer. Any overpayment (including payments made by the taxpayer for PSC taxes due for October 2001, or thereafter) will be refunded to the taxpayer.
A transportation service provider in its first year of doing business must file an amended Form U-6 to adjust the estimate used in its original filing to reflect the actual gross income received during the year in which October 1, 2001, occurs. To file an amended Form U-6, the taxpayer should total the tax installments paid through September 30, 2001. Compare this amount with the actual income earned for the tax year through September 30, 2001, multiplied by the four percent tax rate. Any overpayment or underpayment of PSC taxes should be reported on the amended Form U-6. The first-year filer's PSC taxes due for the installments due after September 30, 2001, are abated. The gross income received on October 1, 2001, and thereafter must be reported on GET returns.
Example 1. Carrier ABC is a transportation service provider taxable under HRS §239-6. It began its public service company business on March 1, 2001, and is a calendar year taxpayer making quarterly installment payments. Carrier ABC will be subject to the PSC tax from the date that it commenced business (March 1, 2001) through September 30, 2001. Beginning on October 1, 2001, Carrier ABC will be subject to the GET on its gross income received on and after that date. Carrier ABC must file an amended PSC tax Form U-6 to reflect the actual gross income received for the period through September 30, 2001, multiplied by the four percent tax rate. See HRS §239-9(e). Compare this computed tax amount to the taxes paid through September 30, 2001, and report any overpayment or underpayment on the amended Form U-6. The PSC tax payments for the period October 1, 2001, through December 31, 2001, will be abated under Act 9.
A transportation service provider in its second year of doing business must file an amended Form U-6 to adjust the estimate used in its original filing. First, the taxpayer must compute the actual average monthly gross income from the inception of business through September 30, 2001. Next, multiply the resulting actual average monthly gross income by the number of months in the (second) taxable year occurring before October 1, 2001. Multiply this result by four percent to arrive at the PSC taxes due.
Second, to determine the amount of any underpayment or overpayment of PSC taxes for the portion of the taxable year through September 30, 2001, divide by twelve (12) the estimated taxes reported for the second PSC taxable year (made on the originally-filed Form U-6). Multiply the result by the number of months in the taxable year occurring before October 1, 2001, and subtract this result from the amount determined in the previous paragraph. Claim or report the resulting overpayment or underpayment on the amended Form U-6.
If a transportation service provider goes out of business in the tax year in which October 1, 2001, occurs, then it must continue to pay the PSC tax through September 30, 2001. The PSC tax installments due for the months remaining after September 30, 2001, will be abated. Gross income received beginning on October 1, 2001, will be subject to the GET.
Example 2. Pauhana Carriers ("Pauhana") chooses to end its PSC business on May 30, 2001, after 10 years of business. Pauhana is a calendar year taxpayer. For tax year 2001, Pauhana makes monthly installment tax payments based on its 2000 gross income. Pauhana must continue to pay its monthly PSC taxes through September 30, 2001. Under Act 9, the monthly PSC tax installments due for the months of October through December will be abated.
For more information on the procedures for first, second, or final year filers, please call Taxpayer Services at (808) 587-4242 or toll-free at 1-800-222-3229.
If a transportation service provider affected by Act 9 does not currently hold a GET license, it must obtain such a license before filing its GET returns. The taxpayer should complete Form BB-1 (State of Hawaii Basic Business Application) and submit it to the Department with a one-time $20 license fee. Under normal circumstances, the Department would recommend that the Form BB-1 be mailed in; however, because of these special circumstances, we suggest that taxpayers apply for their licenses in person at any of the district offices for immediate issuance of a license number.
Though the airlines industry is, as a technical matter, an affected taxpayer, the amendments made by Act 9 have no practical effect on it because both the GET and PSC tax on income from airline transportation are preempted under federal law. See Aloha Airlines, Inc. v. Director of Taxation , 464 U.S. 7 (1983), in which the United States Supreme Court held that the Federal Aviation Act of 1958, §1113(a), as amended, 49 U.S.C.A. §1513(a) prohibits states from levying a tax on the gross receipts derived from the sale of air transportation.
Transportation service providers who are taxed under HRS §239-5(b) and report income on line 1a(1) of Form U-6 are not affected by Act 9.
The PSC tax is not a deferred tax. When a transportation service provider files its 2001 Form U-6 (the PSC tax return), the tax is measured by the income it received in the 2000 tax year. With the filing of this Form U-6, the taxpayer is satisfying its 2001 reporting requirements (rather than its 2000 year responsibilities).
In implementing Act 9, the Department will assign the PSC taxes due for the taxable year on monthly basis. Using this method, the PSC taxes that should be paid will be the amount assigned to the months in the taxable year that occur before October 1, 2001 (the date of conversion from the PSC tax to GET system). The PSC taxes that should be abated will be the amount assigned to the months in the taxable year that occur after September 30, 2001.
For first and second year filers, adjustments will be made after the receipt of the required filing of an amended Form U-6 for the first or second year of the taxpayer's operations, whichever is applicable.
HRS §239-9(e) pertains to adjustments of gross income estimates for first and second year filers, and states "An amended return shall be filed after the close of the applicable taxable year for each year for which an estimated tax return was filed[.]"