On redetermination of an accounting of profits, the Federal Court (FC) rejected Apotex’s claim that the profits awarded to Servier due to Apotex’s manufacture and sale of infringing perindopril should be reduced based on alleged non-infringing alternatives (NIAs).
Background
In 2008, the FC found that Servier’s patent claiming perindopril was valid and infringed by Apotex, and subsequently ordered Apotex to pay a combined total of $CAD 61 million plus interest, representing Apotex’s profits from its Canadian and export sales. Among other things, the trial judge rejected Apotex’s defence that it could and would have sold non-infringing perindopril (sourced from jurisdictions where there were no patents for perindopril) to its foreign affiliates in the UK and Australia.
As we reported, on appeal the Federal Court of Appeal (FCA) held that the trial judge erred by rejecting the relevance of an existing NIA at law. However, the FCA found no errors in the trial judge’s conclusion that Apotex failed, on the evidence, to establish it could and would have obtained the required quantity of non-infringing perindopril at the relevant time from all but three of its proposed foreign suppliers: Ipca, Intas and Signa.
The FCA held that the trial judge erred by not explaining why she rejected the evidence related to those three foreign suppliers, and remitted the following issues back to the judge: (1) whether Apotex could and would have obtained sufficient quantities of non-infringing perindopril from those three suppliers, and if so, (2) whether Apotex could have and would have used non-infringing perindopril to replace the sales it made in the real world to its affiliates in the UK and Australia.
Legal test for NIA defence
When considering the effect of a defendant marketing a non-infringing alternative in the hypothetical world, courts must answer two questions:
(1) could the infringer have sold the non-infringing alternative?
(2) would the infringer actually have sold the non-infringing alternative?
“Could”
The trial judge rejected Apotex’s contention that three proposed unaffiliated third-party suppliers (located in India and Mexico) could have made sufficient quantities of non-infringing perindopril during the infringement period (2006-2008).
The judge found that, as the proposed suppliers did not make commercial quantities of perindopril prior to or during the infringement period in the real world, the complexity of effecting the required technology transfers and obtaining the necessary regulatory approvals would have contributed to a delay in Apotex coming to market. As a result, Apotex could not have started to replace its real-world sales to its UK and Australia affiliates until a year after its real-world sales actually began.
“Would”
The trial judge noted that the intentions, motivations and preferences of the infringing party in the real world are instructive in drawing inferences as to what it would have done in the hypothetical world.
The trial judge found that, although Apotex could have used non-infringing perindopril sourced from its proposed third-party suppliers one year into the infringement period, the evidence suggested it would not have done so. Rather, drawing inferences from Apotex’s conduct and motivations in the real world, including its admitted preference to manufacture products at its “own sites,” the trial judge held that Apotex would not likely have used the proposed unaffiliated third parties to manufacture perindopril for its foreign markets. The court held that Apotex would likely have done in the hypothetical world exactly what it did in the real world, which was to wait until its Indian affiliates were ready and then transfer the technology and commercial production to them.
Norton Rose Fulbright Canada LLP represented Servier at both the liability and quantification stages and on appeal.
Links:
Redetermination – Les Laboratoires Servier et al v Apotex inc et al, 2018 FC 346
Accounting of profits – 2015 FC 721; 2017 FCA 23
Validity and infringement – 2008 FC 825; 2009 FCA 222
