The Federal Court of Appeal has upheld the Federal Court’s order that Teva Canada Limited pay Janssen Inc. (Janssen Canada) and Janssen Pharmaceuticals, Inc. (Janssen US) over $18 million for infringing sales of levofloxacin (reported here). The Court of Appeal’s decision addresses standing, mitigation, market reconstruction, and how freely a trial judge can swing the “broad axe” in quantifying damages.
Since at least 1998, Janssen Canada has sold levofloxacin in Canada as LEVAQUIN®.
Teva sold its infringing Novo-levofloxacin in Canada from November 29, 2004, until October 17, 2006, when the Federal Court enjoined further sales. The injunction followed from the Federal Court’s finding that Teva was infringing Canadian Patent No. 1,304,080 (080 Patent). The 080 Patent expired on June 23, 2009.
Janssen US had standing to claim damages for lost transfer sales into Canada
The Court of Appeal upheld the Federal Court’s finding that Janssen US had standing to seek damages against Teva.
Janssen US’s claim was based on lost transfer sales to Janssen Canada. At issue was section 55(1) of the Patent Act, which provides, “A person who infringes a patent is liable to the patentee and to all persons claiming under the patentee” (emphasis added). The Court of Appeal held that a “party need only establish that they enjoy rights under a patent in order to be a person claiming under the patentee.”
The evidence was that the owner of the 080 Patent, Daiichi Sankyo Company, Limited, had been “well aware” as to how the Janssen companies had been “making and selling levofloxacin finished products.” The Court of Appeal found this evidence amply supported the Federal Court’s finding that Janssen US had had Daiichi’s permission to be involved in the LEVAQUIN® supply chain and was thus a person claiming under the patentee. Janssen US was not required to demonstrate that it had held title in Canada to the LEVAQUIN® tablets it had sold to Janssen Canada.
Federal Court’s findings on mitigation, market reconstruction and costs upheld
The Court of Appeal upheld the Federal Court’s quantification of Janssen Canada’s and Janssen US’s damages. Although grounded in the facts of the case, particularly the construction of the market for LEVAQUIN®, AVELOX®, and TEQUIN®, several of the Court of Appeal’s findings are of general interest.
The “broad axe.” The Court of Appeal found the Federal Court had not erred by repeatedly invoking the “broad axe” principle. In its reasons, the Federal Court endorses a passage from Watson, Laidlaw & Co. Ltd. v Pott, Cassels, and Williamson (1914), 31 R.P.C. 104, where Lord Shaw wrote, “[C]ompensation is therefore accomplished to a large extent by the exercise of a sound imagination and the practice of the broad axe.” The Court of Appeal did not disagree. In the context of quantifying damages for patent infringement, where a hypothetical “but for” patent infringement world must be constructed, the references to the broad axe were not in error. The Federal Court looked to the economic proof and likely market outcomes; it did not mete out “rough justice.”
Mitigation. The Court of Appeal defined the concept of mitigation: a plaintiff is not entitled to recover compensation for loss that could have been avoided by taking reasonable action. The Court of Appeal added that, “[a] plaintiff will generally receive the benefit of the doubt on the ground that a defendant should not be overly critical of a plaintiff’s good-faith effort to avoid difficulties caused by the defendant’s wrongful act.”
The Court of Appeal rejected Teva’s assertions that the Federal Court had misapprehended the evidence on mitigation.
The first issue on mitigation concerned Janssen’s damages from price suppression. Janssen had lowered the price of the LEVAQUIN® it sold to hospitals upon Teva’s market entry in November 2004. At trial, Teva argued that Janssen should have raised that price back up when it had regained market exclusivity in October 2006, following Teva’s market exit. The Court of Appeal upheld the Federal Court’s finding that Janssen had had business reasons for not doing so. As a result, Janssen suffered damages from the suppressed hospital price through patent expiry in 2009, even though Teva had long since left the market.
The second issue on mitigation concerned Janssen’s damages from lost share of the market for this class of compounds. The Court of Appeal upheld the Federal Court’s finding that Teva had not led compelling evidence that Janssen should have promoted LEVAQUIN® when it had regained market exclusivity in October 2006. Janssen had stopped promoting LEVAQUIN® upon Teva’s market entry in November 2004. The Court of Appeal found that the evidence Teva had relied on was from experts not qualified to opine on the reasonableness of Janssen’s business decisions.
Costs. The Court of Appeal upheld the Federal Court’s $1 million costs award to the Janssen companies. The Court of Appeal rejected Teva’s argument that a lump-sum costs award must correspond to the amount an assessment officer would have assessed.