FCA Confirms Entirety of Inventors’ Conduct is Relevant in Obviousness Analysis and Upholds Inventiveness of Crystal Form Patent

The Federal Court of Appeal (“FCA”) upheld the validity of Canadian Patent 2,436,668 (“668 Patent”) which covers Form I ODV succinate (marketed as PRISTIQ) in two separate appeals by Apotex Inc. (“Apotex”) and Teva Canada Ltd (“Teva”), finding that the claims were novel and inventive.

Obviousness

The FCA began be reiterating key points of the obviousness analysis:

  • The Sanofi test is flexible and expansive and can include consideration of the invention story as a whole;
  • The “obvious to try” test is only one part of the obviousness analysis and does not displace other tests, including the test set out in Beloit Canada Ltd. v. Valmet Oy, (1986), 64 N.R. 287, 8 C.P.R. (3d) 289 (F.C.A.), i.e., whether the skilled person would have come “directly and without difficulty” to the solution taught by the patent;

From this framework, the FCA found that the claims of the 668 Patent were inventive, focusing on the Federal Court’s findings that:

  • None of the crystal forms of ODV succinate had ever been made, disclosed, or characterized;
  • it was impossible to predict whether or how ODV succinate could be made;
  • there was a lack motivation to form ODV succinate because past experiments with ODV fumerate (another salt of ODV) had failed (it had poor bioavailability); and
  • many experiments were required to produce the crystal form.

In both appeals, the FCA rejected arguments that the claims were “obvious to try” in light of Bristol-Myers Squibb Canada Co. v. Teva Canada Limited, 2017 FCA 76 (Atazanavir) and Pfizer Limited v. Ratiopharm Inc., 2010 FCA 204 (Amlodipine), which cases related to salts. The FCA noted that there was evidence in Atazanavir and Amlodipine that the salts in issue had already been shown to offer stability advantages and improved pharmaceutical properties. By contrast, salts of ODV succinate would have not have been expected to work because the ODV fumerate salt had not worked.

In the Apotex appeal, the FCA rejected Apotex’s argument that experiments unrelated to the salt screens for ODV succinate, such as prior experiments with pro-drugs and with ODV fumerate should be excluded from consideration because they were efforts “in other directions”. The FCA disagreed and confirmed that it the entirety of the inventors’ course of conduct could be considered including other directions and approaches taken to solving the problem.

Similarly, the FCA also rejected Apotex’s argument that tests that occurred after the ODV succinate crystal was discovered should not be considered. The FCA found that the crystal form needed to be characterized and the stability of other forms analyzed in order to confirm that the identified crystal was the most stable hydrated form and that these experiments were relevant considerations in the obviousness analysis.

Anticipation

Apotex’s appeal also raised issues of anticipation that were not present in Teva’s appeal. At first instance, Apotex did not lead direct evidence of anticipation but addressed it in its memorandum, relying on evidence from its experts on obviousness. The Federal Court rejected this approach because neither expert was instructed on the law of anticipation, the expert evidence related to obviousness, and a party cannot use information filed in relation to one issue to attack a different issue.

The FCA confirmed that obviousness and anticipation are separate inquiries, but did not directly address the Federal Court’s holding on whether expert evidence on the issue of obviousness could be used to support an anticipation analysis. Instead, it found that Apotex’s evidence was insufficient to prove anticipation so it was irrelevant whether the Federal Court considered it.

*Special thanks to Jamie Parker, an articling student, for his help on this post.

Link: Teva Canada Ltd. v. Pfizer Canada Inc. et al., 2019 FCA 15; Apotex Inc. v. Pfizer Canada Inc. et al., 2019 FCA 16.

Quebec Court of Appeal overturns minister’s decision to remove Remicade from Quebec’s List of Medications

The Quebec Court of Appeal has declared a decision by the Minister of Health and Social Services to “delist” Remicade from Quebec’s List of Medications (Quebec’s equivalent to a formulary) to be invalid and has ordered the minister to reinstate the drug on the list. Two takeaways from this decision: the minister’s decisions to list or delist individual drugs are administrative in nature and not regulatory, and a decision to delist may require the minster to respect certain minimum standards of procedural fairness, which the minister failed to do in this case.

Background

In February 2017, Quebec’s then Minister of Health and Social Services, Dr. Gaétan Barrette, published a notice removing Remicade from the List of Medications and declaring it would no longer be covered by the provincial drug insurance scheme (except in certain exceptional circumstances).

This followed the minister entering a product listing agreement with the manufacturer of Inflectra, a bio-similar drug to Remicade. The minister relied on authority granted to him under s. 60.0.4 of the Act respecting prescription drug insurance, which allows delisting a drug if a competing medication is the subject of a listing agreement. The minister gave Janssen no prior notice that such a decision was forthcoming and, on the facts of the case, Janssen had good reason to be surprised by the decision. Janssen applied for judicial review of the minister’s decision.

Fairness requirement

On January 16, 2019, the Court of Appeal declared that the minister had failed to respect the minimum requirements of procedural fairness that applied in the circumstances. The court held that in the factual context in which the minister made his decision, the principle of procedural fairness demanded: (i) giving Janssen sufficient notice that such a decision might be made; (ii) giving Janssen the opportunity to present its comments on the forthcoming decision; and (iii) providing Janssen with reasons for the decision.

Concluding that the minister’s failure to respect basic fairness requirements justified invalidating his decision, the court ordered that Remicade be reinstated on the List of Medications. The court gave no indication of whether the minister’s decision was reasonable on its merits.

The court applied a duty of fairness on the basis that the decision to list or to delist a specific drug on the List of Medications is an administrative one, not a regulatory one, even though the publication of the List of Medications as a whole is regulatory in nature. Therefore, listing decisions made by a minister for specific drugs are subject to judicial review based on the standard applicable to administrative decisions, not on the standard of review applicable to regulations.

This decision is likely to broaden the potential basis for judicial review of ministerial decisions on listing and delisting drugs on the List of Medications, and should also require that, in the future, the minister take into account procedural fairness requirements when deciding whether to delist a drug. However, the content of this duty may vary depending on the factual context.

Link: Janssen inc. c. Ministre de la Santé et des Services sociaux, 2019 QCCA 39 (French).

Advertising Standards Canada introduces new advertising dispute procedure for resolving disputes between competitors 

Effective February 11, 2019, Advertising Standards Canada (Ad Standards Canada) will implement a new Advertising Dispute Procedure (the Procedure) to govern complaints between competitors for  alleged breaches of the Canadian Code of Advertising Standards (the Code). The new Procedure (formerly known as the Trade Disputes Procedure) is designed to further streamline the resolution process for advertising complaints between competitors. Key elements of the Procedure include: 

  • New pre-conditions for accepting a complaint. Ad Standards Canada will not accept a complaint from an advertiser unless it is satisfied that: (i) the complainant has made a good faith attempt to resolve the dispute directly with the defendant advertiser; (ii) there are reasonable grounds to proceed with the alleged Code violation(s), and the advertising at issue has not been excluded from adjudication; and (iii) the complaint is accompanied by the applicable fee. 
  • Voluntary resolution meetings.  For a small fee, either party may ask Ad Standards Canada to hold a voluntary resolution meeting between the complainant and defendant advertiser to resolve the complaint. The meeting will be moderated by Ad Standards Canada. A voluntary resolution meeting will only occur if both parties agree. Failure to agree to attend the resolution meeting will not prejudice the party in adjudicating the complaint. 
  • Three member adjudication panel. Under the new Procedure, complaints will be reviewed by a three member Adjudication Panel (the Panel). The Panel will be chaired by a lawyer and two members selected from a roster of industry professionals. 
  • No in-person hearing or appeal. In contrast to the old procedure, no live hearings will be held. The Panel will only consider written submissions from the parties. No appeal will be permitted from the decision of the Panel.
  • Timelines. Ad Standards Canada will acknowledge the complaint within three working days of receipt. Ad Standards Canada will confirm whether the complaint has been accepted or declined. The defendant’s response, complete with all evidence, is due no later than 10 working days following a voluntary resolution meeting or 10 working days following receipt of the complaint if no resolution meeting is held. The complainant will then have five working days after receipt of the defendant’s response to submit a reply following which the defendant will have five working days to submit a further reply. No further submissions will be allowed unless specifically requested by Ad Standards Canada. The Panel’s decision will be communicated to the parties within 10 working days after the Panel received the completed adjudication file from Ad Standards Canada. 
  • Confidentiality and case summaries. Proceedings under the new Procedure will remain confidential. However, Ad Standards Canada intends to publish anonymized case summaries to provide clarity about practices that are considered to contravene the Code. Consistent with the previous procedure, failure to comply with the Panel’s decision may result in Ad Standards Canada publicly identifying the parties.
  • Reduced fees.  Fees under the new Procedure are reduced from the previous procedure which could cost upwards of $15,000 for a hearing. The new adjudication fee is payable by the complainant and partially refundable (in the amount of $3,500) in the event the complaint is settled before the panel receives the parties’ submissions. The voluntary resolution meeting fee is shared equally by the complainant and the defendant while the complaint filing fee is paid by the complainant.
Member fee (+Tax) Non-member fee (+Tax)
Complaint filing fee (non-refundable) $1,500 $2,000
Voluntary resolution meeting fee (non-refundable) $2,000 $3,000
Adjudication fee $7,000 $8,500

Questions regarding the interpretation or application of the Procedure can be directed, without cost, to Ad Standards Canada.

Link: Ad Dispute Procedure – 2019

Health Canada consulting on the contents of the Generic Submissions Under Review List

On January 7, 2019, Health Canada opened a consultation on whether to include the names of sponsor companies on the generic submissions under review list (GSUR) for Abbreviated New Drug Submissions (ANDSs). This type of information was recently added to the list of drug and health product submissions under review (SUR) that Health Canada has maintained since 2015.

Historically, the SUR list has been restricted to New Drug Submissions (NDSs) and Supplemental New Drugs Submissions (SNDSs). With respect to each of these submissions, the SUR list includes the medicinal ingredient, therapeutic area, and month in which the submission was accepted, as well as the recent addition of sponsor and “submission class” information for submissions accepted on or after October 1, 2018. The GSUR was launched in October 2018 with a more limited set of data restricted to the medicinal ingredient, the therapeutic area, and the number of submissions under review, but not the month the submission was accepted or the name of the company sponsor.

The consultation on adding sponsor names to the GSUR list is open until February 8, 2019. In seeking feedback, Health Canada has asked for (i) a description of the person providing feedback (e.g., General Public, Health Professional, Pharmaceutical Industry), (ii) the potential impact of including the name of the sponsor, and (iii) if and how this information would be useful to the person providing feedback.

For details on the consultation see: https://www.canada.ca/en/health-canada/services/drugs-health-products/public-involvement-consultations/drug-products/notice-company-names-generic-submissions-under-review.html

Top Headlines of 2018

Last year ushered in a number of changes to the Canadian pharmaceutical and life sciences sector. 2018 also served as a year to explore the impacts of major intellectual property decisions and regulatory changes from 2017 including the impact of the Supreme Court’s decision in NEXIUM striking down the Promise Doctrine and the implementation of CETA on single-track patent litigation under the newly amended Patented Medicines (Notice of Compliance) Regulations. Further, a number of IP and regulatory developments arose, such as: the potential for a national pharmacare program, advances to the self-care products framework for non-prescription drugs, natural health products and cosmetics, and amendments to the Patent Act and other intellectual property statutes as a result of Bill C-86.

We have compiled our list of Pharma in Brief’s top headlines from 2018 below:

Legislative Developments

  • Bill C-86. The enactment of Bill C-86, the Budget Implementation Act, 2018, No. 2 in December 2018 brought with it significant changes to Canada’s core IP statutes, including changes to the Patent Act that will affect patentees in the pharmaceutical and life sciences sector, such as: (i) the possible admissibility of the patent prosecution history (file wrapper) in litigation as evidence to rebut a patentee’s representations on claims construction, (ii) revised and restated exceptions to infringement for experimental use and continued acts first undertaken prior to the claim date, (iii) provision for standard-essential patents, and (iv) regulations for demand letters and related offences.
  • New protections for biologics and other pharmaceuticals under the USMCA. The United States-Mexico-Canada Agreement (USMCA), which replaces the North American Free Agreement (NAFTA) will introduce new protections for biologics and other pharmaceuticals, including an extended data protection term of ten years for new biologics and a new patent-term restoration system for unreasonable delay in patent prosecution. This new system is not specific to pharmaceuticals and will be additional to any Certificate of Supplementary Protection (CSP) that may be available for pharmaceutical patents. Although signed in 2018, the USMCA awaits ratification by its member states in 2019 before it will come into force.
  • Health Sector Payment Transparency Act delayed or abandoned. The Ontario government passed the Health Sector Payment Transparency Act (HSPTA) as part of Bill 160 in December 2017 and published draft regulations for consultation in February 2018. The draft regulations defined terms, set thresholds, and established the manner and frequency of, and exceptions to, reporting requirements. However, in April 2018, the Ontario government delayed implementation until after the fall election. The regulations have not been revisited since the election and it is unclear whether they will be enacted or abandoned under the current Ontario government.

Regulatory Schemes and Guidance

  • Health Canada Expands the Submissions Under Review List to include ANDSs. As of October 1, 2018, Health Canada is publishing a list of abbreviated new drug submissions (ANDSs) under review on the Generic Submissions Under Review (GSUR) List. The list includes the medicinal ingredient(s), the therapeutic area and the number of submissions under review. Health Canada also expanded its Regulatory Decisions Summaries to include certain ANDSs, supplemental abbreviated new drug submissions (SANDSs) and supplemental new drug submissions (SNDSs).
  • The potential for a national pharmacare program. In February 2018, the Federal government tabled its 2018-2019 budget, which contemplated the creation of a national pharmacare program that would introduce a pricing and reimbursement model for certain prescription medications. Beyond the Standing Committee on Health’s April 2018 recommendations on the best way to move forward with a universal single payer prescription drug coverage program, the Advisory Council on the Implementation of National Pharmacare is expected to provide a 2019 report commenting on the proposed implementation.
  • New CADTH guidelines for biosimilars. In February 2018, the Canadian Agency for Drugs and Technologies in Health (CADTH) released new procedural guidelines for both cancer and non-cancer-related biosimilar submissions. Key changes to the review and resubmission for biosimilars included shorter review times, fewer submission requirements, a new fee structure, and no provincial/territorial reimbursement recommendation.
  • Self-care products framework. Health Canada announced that it will advance the new self-care products framework, a new risk-based regulatory framework for non-prescription drugs, natural health products, and cosmetics, under existing legislation by updating the Natural Health Products Regulations and the Food and Drug Regulations on a rolling basis through 2020.

Case Law Developments

  • Developments on PM(NOC) cases and CSPs following CETA. In September 2017, following the enactment of the Canada-European Union Comprehensive Economic and Trade Agreement (CETA), key reforms to the Patent Act were introduced, including patent term restoration (CSPs) for patented pharmaceuticals under the Certificate of Supplementary Protection Regulations and a new single-track pharmaceutical patent litigation system under the Patented Medicines (Notice of Compliance) Regulations. With respect to CSPs, 16 CSP applications have been granted, 4 applications have been refused, and 7 applications are still pending, according to Health Canada’s online Register. The first application challenging the Minister’s decision to refuse a CSP was commenced in the Federal Court (Federal Court file No. T-1603-18) in August 2018. With respect to proceedings under the newly amended Patented Medicines (Notice of Compliance) Regulations, approximately 20 actions were started in 2018. Early interlocutory decisions included: (i) the Federal Court’s decision to dismiss Amgen’s motion against Genentech, Inc. and Hoffman-La Roche Limited for early dismissal of two patents under section 6.08 of the Patented Medicines (Notice of Compliance) Regulations, and (ii) the requirement for a concurrent trial on issues of validity in cases brought by a first person against two generics related to patents covering Biogen’s FAMPYRA .
  • Post-NEXIUM decisions. The impact of the Supreme Court’s landmark ruling in AstraZeneca Canada Inc. v Apotex Inc., 2017 SCC 36 (NEXIUM), which rejected the “Promise Doctrine”, played out in different contexts throughout the year. For one, the Ontario Court of Appeal and the Federal Court of Appeal reached conflicting conclusions as to whether the NEXIUM decision’s change in law triggered the special circumstance exception to the doctrine of issue estoppel. Further, AstraZeneca successfully relied on the NEXIUM decision to avoid liability for section 8 damages. The Court also refused Apotex’s motion to re-open validity to adjudicate the issue of overpromising in light of the Supreme Court decision. Finally, the Ontario Superior Court rejected Apotex’s later attempt amend its pleadings in a section 8 damages action in order to revive the Promise Doctrine under the guise of invalidity allegations.
  • Infringement damages and accounting of profits decisions. The Federal Court of Appeal upheld the Federal Court’s damages order that Teva pay Janssen over $18 million for infringing sales of levofloxacin (LEVAQUIN) in Canada. The Federal Court of Appeal also held that Janssen US had standing to claim damages under section 55(1) of the Patent Act (i.e., Janssen US was not required to demonstrate that it had held title in Canada to the LEVAQUIN tablets it had sold to Janssen Canada). In a decision relating to Bayer’s patents for YAZ and YASMIN, the FCA reiterated that the patentee, and not the infringer (Apotex), is entitled to elect between damages and an accounting of profits after a finding of infringement. In a case between Eli Lilly and Apotex related to CEFACLOR, the Federal Court of Appeal confirmed that in assessing the availability of a non-infringing alternative (NIA) defence, the NIA must be legal and cannot infringe any patent, and its economic viability must be considered objectively. The Federal Court of Appeal upheld the Federal Court’s damages award but remitted the issues of prejudgment interest to the Federal Court for redetermination. Finally, in a redetermination of profits decision related to COVERSYL (perindopril), the Federal Court dismissed Apotex’s NIA defence finding that Apotex could not and would not have sold the NIA in the hypothetical world. The Court refused to reduce Servier and ADIR’s profits.

As 2019 unfolds we will continue to monitor developments in these areas and look forward to sharing them with you in Pharma in Brief.

FCA Confirms that Non-Infringing Alternative Must be Legal and Objectively Economically Viable

The Federal Court of Appeal (“FCA”) confirmed that in assessing the availability of a non-infringing alternative (“NIA”) defence, the NIA must be legal and cannot infringe any patent, and its economic viability must be considered objectively. The FCA upheld an award for damages for patent infringement by the Federal Court (“FC”) but remitted the issue of prejudgment interest back for redetermination.

Background

This case arises from a dispute between Apotex Inc. (“Apotex”) and Eli Lilly and Company and Eli Lilly Canada Inc. (together, “Lilly”) regarding eight of Lilly’s process patents in respect of the drug cefaclor (the “Lilly Patents”). The infringement action was bifurcated into a liability phase and a quantification phase.

During the liability phase, two of three of Apotex’s manufacturing processes were found to infringe the Lilly Patents. The third process (referred to as the “Lupin 2 process”) was found not to have infringed. It was the product made using the Lupin 2 process that Apotex raised as an NIA in the quantification phase of the action, and the FCA’s focus on appeal.

An NIA must be objectively economically viable

The FC found in the quantification phase that an NIA defence is not available in law in a patent infringement action. This decision predates the FCA’s cases confirming the availability of NIAs in patent damages cases in AstraZeneca Canada Inc et al v Apotex Inc, 2017 FC 726 and Les Laboratoires Servier et al v Apotex Inc et al2018 FC 346 , which we previously wrote about here and here. Accordingly, the FC erred on this issue; however, this error was immaterial as the FCA found that Apotex’s NIA defence was not available on the facts of the case.

In assessing Apotex’s NIA, the FCA confirmed that, in addition to proving that the infringer could and would have used the NIA, the NIA had to be economically viable. This economic viability has to be measured objectively.

In this case, the evidence showed that the Lupin 2 process increased Apotex’s costs by at least 40%. As a result, Apotex lost more than $5 million on the sale of its products using this process. At the damages trial, a majority of the experts agreed that unless there were other valid economic reasons to market the product, a rational generic drug manufacturer entering an exclusive market would not view the Lupin 2 process as commercially viable. The FCA was not persuaded by Apotex’s suggestion that it would use the NIA even if it meant losing money on sales since the purpose of an NIA is to quantify the true value of the patent. Accordingly, assessing the viability of the NIA only from the infringer’s subjective perspectives could artificially reduce a patent damages award.

An NIA must not infringe any patent

The FCA also found that an NIA defence was not available to Apotex because it failed to show that its NIA was otherwise lawful.

Although the Lupin 2 process was found not to have infringed any of the Lilly Patents in issue in the liability phase, another patent that was in force during the damages period was raised at the quantification phase of the action (the “646 Patent”). Once Lilly had put the issue of infringement of the 646 Patent into play, it was Apotex’s burden to show that its NIA would not have infringed the 646 Patent. The FCA found that, on its face, the Lupin 2 process infringed the 646 Patent.

Regardless, the FCA also found that Apotex could not and would not have entered the market with an NIA.

Interest as damages

The only basis on which the FCA remitted the matter back for redetermination was on the issue of prejudgment interest. The FC awarded Lilly compound interest at the quantification stage. It suggested that there ought to be a presumption of compound interest to reflect commercial realities. It also found that Lilly did not have to prove what use it would have made of the money it would have made had the patent not been infringed.

The FCA disagreed and found that, although compound interest is available, there is no general presumption regarding compound interest, and interest as a head of damages must be proved in the same way as any other form of loss or damage. Despite this, the FCA seemed to suggest that it would be open to the FC to award compound interest on the evidence that it already had before it.

Link to decision:

Apotex Inc. v. Eli Lilly and Company and Eli Lilly Canada Inc., 2018 FCA 217

Bill C-86 receives Royal Assent, bringing amendments across Canada’s IP statutes

Canada’s core IP statutes have been amended by Bill C-86, which received Royal Assent as the Budget Implementation Act, 2018, No. 2, SC 2018, c 27 on December 14, 2018. The final version of the legislation includes amendments to the Patent Act that are substantially identical to the version that received first reading 46 days ago, on October 29, 2018. The patent-law changes in Bill C-86 are not specifically directed at pharmaceutical patentees, but have the potential to affect this area of litigation.

As we reported following first reading, the changes to the Patent Act include:

  • Patent prosecution history (file-wrapper) may be admitted in appropriate cases as evidence to rebut patentees’ representations regarding claims construction.
  • Exceptions to infringement concerning experimental use and continued acts first undertaken prior to the claim date have been revised and re-stated.
  • Regulation of demand letters and related offences have been introduced.
  • Provision has been made for standard-essential patents.

The omnibus budget Act also includes amendments to the Trade-marks Act and the Copyright Act; provides for a new College of Patent Agents and Trade-mark Agents Act; and effects changes to diverse legislative schemes impacting the IP regime, including privacy and bankruptcy.

We will be reporting on other implications of these amendments for Canadian IP here and on our Brands Protection Blog in the coming days — stay tuned.

Two generics, one hearing: Federal Court orders common trial on patent validity issues in section 6 actions

The Federal Court has ordered that the trial of two actions brought under the post-CETA Patented Medicines (Notice of Compliance) Regulations (the Regulations), against two separate generics, be heard concurrently, on issues of invalidity. This decision highlights the Federal Court’s push to streamline section 6 actions. The court rejected the defendant Taro’s arguments that the common hearing of issues reduces the likelihood that Taro will benefit from any “first to market” advantage.

Background

Taro and Apotex are both seeking to market a generic version of Biogen’s FAMPYRA (fampidrine) product in Canada.  Both generics served Notices of Allegations (NOAs) alleging that each of their products will not infringe Canadian Patent 2,562,277 (the 277 Patent) and that the 277 Patent is invalid. In response, Biogen commenced section 6 actions against both generics; first, the Taro action on June 15, 2018 (T-1163-18), and subsequently, the Apotex action on July 24, 2018 (T-1416-18).

The Court first set the Taro action down for trial to begin on March 2, 2020. When scheduling the Apotex action, Biogen and Apotex advised that they could also be ready for a trial on March 2, 2020. With Biogen’s consent, Apotex intended to amend its pleadings to include Taro’s invalidity allegations and the two parties therefore proposed that the issues of validity raised in both actions be heard concurrently. Despite Biogen’s offer to permit matching amendments to its pleadings, Taro opposed the idea of a concurrent hearing.

Concurrent trial does not deprive the “first” generic of any commercial advantage

Taro argued that a concurrent trial would result in simultaneous judgments, depriving Taro of any commercial advantage of being first to market with a generic fampidrine product. The Case Management Judge disagreed, explaining that a concurrent trial may or may not result in Apotex having its judgment at the same time as Taro. In any event, the Court noted that “[b]eing the first to send out a [NOA] in respect of a particular medicine does not entitle a generic to be the first to obtain a judgment in an action pursuant to the Regulations, or guarantee it that result.”

Efficient use of judicial resources dictates a concurrent trial

The Court held that a concurrent trial on common validity issues is the most efficient use of the Court and the parties’ time and resources. This was based on a number of common elements across both actions: same judge; similar invalidity issues; same counsel for Biogen in both actions; and the same inventors.

In conclusion, the Court stated that a concurrent trial would “achieve the just, most efficient and least expensive determination of the issues in both actions, and would not likely result in prejudice to Taro’s substantive or procedural rights, including any rights it may have pursuant to the Regulations.” The Court ordered accordingly, holding that the Apotex trial would be adjourned following the conclusion of the case on invalidity in order to permit argument on infringement in the Taro case. The Apotex case would then resume on issues of infringement at a later date.

ONCA Permits Pleading Amendments Asserting Validity of Previously Invalidated Patent following Nexium Decision

This decision of the Ontario Court of Appeal (ONCA) arises in the context of a novel action brought by Apotex seeking damages for the delayed market entry of its generic version of Sanofi’s blockbuster ramipril drug.

Apotex’s claims in this action are linked to the invalidity of Canadian Patent No. 1,341,206 (206 Patent). The 206 Patent had previously been invalidated  based on the application of the “promise doctrine”. In June 2017, the Supreme Court of Canada (SCC) held that the invocation of the “promise doctrine” was an error in law and abolished the doctrine once and for all in AstraZeneca Canada Inc. v. Apotex Inc. (Nexium). This decision of the ONCA reverses a lower court decision denying Sanofi’s pleadings amendments, which asserted that the underlying decision invalidating the 206 Patent was based on wrong legal principles, and relied on the Nexium decision.

This is a significant development in this case which also highlights a growing tension between decisions of the Federal Court and the Ontario Superior Court in a novel legal proceeding.

Background

In this action Apotex claims damages pursuant to three statutes: An Act concerning Monopolies, and Dispensation with penal laws, etc., R.S.O. 1897, c. 323 (Ontario Statute of Monopolies); An Act concerning Monopolies and Dispensations with Penal Laws, and the Forfeitures thereof, 1624, 21 Jac. I, c. 3 (UK Statute of Monopolies, and collectively with the Ontario Statute of Monopolies, the Monopolies Acts); and the Trade-marks Act, R.S.C., 1985, c. T-13.  While the Patented Medicines (Notice of Compliance) Regulations (the Regulations) provide a specific remedy for delayed generic market entry pursuant to section 8, and despite Apotex having already received $215 million in section 8 compensation, Apotex commenced this novel action in the Ontario Superior Court claiming additional sums under the Monopolies Act and Trade-Marks Act.

Following the SCC’s rejection of the promise doctrine in Nexium, Schering and Sanofi-Aventis et al. (Defendants) sought to amend their pleadings, which Apotex opposed on the basis of issue estoppel. The motions judge denied the Defendants’ amendments, as we previously reported.

The amendments assert the validity of the 206 Patent, which was previously held to lack utility in both PM(NOC) proceedings and in a subsequent infringement action. Both cases predated the abolition of the promise doctrine by the SCC in the Nexium decision, reported here. The ONCA found that the SCC’s rejection of the promise doctrine in Nexium constituted “special circumstances” that exempted the application of the doctrine of issue estoppel and distinguished a decision by the Federal Court of Appeal (FCA) on a similar point in Eli Lilly Canada Inc. v. Teva Canada Ltd., 2018 FCA 53 (FCA Olanzapine), previously reported.

Decision on Appeal

The ONCA allowed the Defendants to amend their pleadings, finding that the preconditions for issue estoppel had been met, but exercised its discretion not to apply the doctrine. It found that the SCC’s decision in Nexium constituted a change in the law and that denying the amendments would work an injustice in the circumstances of the case. Apotex’s own claims for relief put the validity of the 206 Patent in issue — it is an essential element of Apotex’s claims. Additionally, the quantum of damages claimed is approximately $1 billion to $3 billion. The ONCA accepted that allowing the amendments would lead to re-litigating the 206 Patent’s validity, but noted that the costs of any re-litigation of patent validity paled in comparison with the quantum of damages claimed by Apotex. Accordingly, it would be fundamentally unfair to deprive the Defendants of the opportunity to defend the validity of the 206 Patent in these circumstances.

Distinguishing FCA Olanzapine

In its analysis, the ONCA also distinguished the FCA Olanzapine decision. In FCA Olanzapine, the impact of Nexium on the validity of a patent was raised on appeal in a section 8 action. The FCA found that the validity of the patent had been previously determined and that Nexium did not warrant the application of the “special circumstances” exception to issue estoppel in the circumstances of that case.

The ONCA observed that the exercise of discretion in the application of issue estoppel permits different courts to exercise their discretion differently. Nevertheless, it distinguished FCA Olanzapine on the bases that it:

  • Concerned a section 8 damages award, not claims for damages pursuant to the Monopolies Acts and the Trade-marks Act; and
  • Was an appeal of a trial decision rather than a decision on a motion for leave to amend pleadings.

The ONCA also expressly disagreed with the FCA on certain issues. First, the ONCA rejected the distinction drawn by the FCA between litigation involving commercial interests and other types of litigation and the FCA’s suggestion that issue estoppel is more applicable in commercial litigation. Second, the ONCA disagreed that permitting a change in the law to constitute a “special circumstance” weakened the objective of finality and held instead that the change in the law presented by Nexium was “precisely the type of special circumstance” that warranted the principle of finality yielding to the circumstances of the case.

Update January 16, 2019: Leave to SCC Filed

On January 7, 2019, Apotex filed an application for leave to appeal this decision to the Supreme Court of Canada (SCC No. 38741).

Link: Apotex Inc. v. Schering Corporation, 2018 ONCA 890; rev’g 2018 ONSC 903

Ontario Superior Court rejects Apotex attempts to revive the Promise Doctrine by dismissing motion for leave to amend, awards substantial indemnity costs

The Ontario Superior Court of Justice (ONSC) recently denied Apotex’s attempt to repackage the now defunct “promise of the patent” doctrine (the Promise Doctrine).  Apotex sought to amend its pleadings to reintroduce the Promise Doctrine under the guise of invalidity allegations of over-breadth, insufficiency, and willful misrepresentation pursuant to sections 27 and 53 of the Patent Act.

The motion was heard in the broader context of the quantum phase of an action for damages by Apotex pursuant to section 8 of the Patented Medicines (Notice of Compliance) Regulations (the Regulations). Abbott and Takeda counterclaimed for infringement of two patents relating to lansoprazole (Lansoprazole Patents), which Apotex alleged were invalid. In dismissing Apotex’s motion, the ONSC awarded substantial indemnity costs against Apotex for its unfounded allegations of fraud.

This adds to the body of law that has resisted attempts to revive the Promise Doctrine following the Supreme Court of Canada’s decision in AstraZeneca Canada Inc. v. Apotex Inc., 2017 SCC 36 (AstraZeneca).

Background

This dispute, which has been ongoing for the past eight years, has a complex procedural history that includes the hearing of two summary judgment motions, in addition to raising various other interlocutory matters. In 2013, Abbott and Takeda were successful in seeking an order for partial summary judgment against Apotex denying it the right to a disgorgement of profits for the period after the parties agreed to settle the litigation with respect to liability. The motion was brought on the basis that the parties had initially agreed on a settlement of future damages, even though that agreement had since dissolved.

Four years later, Abbott and Takeda brought another summary judgment motion seeking dismissal of the damages action in its entirety on the basis that Apotex’s generic lansoprazole product would not have been approved at the relevant time because it did not comply with applicable health regulatory laws. This motion was dismissed; the Court granted summary judgment to Apotex for damages under section 8 of the Regulations, and ordered that the action be set down for trial. We have previously reported on the results of this most recent summary judgment decision here and here.

In 2018, following the release of AstraZeneca, Apotex brought a motion seeking leave to amend its pleadings prior to the damages trial. If granted, the proposed amendments would have allowed Apotex to include in its defence new allegations of over-breadth, insufficiency, and willful misrepresentation pursuant to sections 27 and 53 of the Patent Act in respect of the Lansoprazole Patents.

Another Attempt to Revive the Promise Doctrine

Since the Supreme Court put an end to the Promise Doctrine last year, a number of proceedings have made their way through the Federal Court on the issue of whether promise-based claims can still support an allegation of patent invalidity. We have previously reported on some of this post-AstraZeneca case law, which can be found here.

The ONSC noted that there had been five judgments in the post-AstraZeneca jurisprudence where, in every case, the Federal Court specifically rejected the efforts of generic drug manufacturers (including Apotex) to advance these types of “Promise Doctrine allegations” cloaked as grounds of insufficiency, overbreadth, and willful misrepresentation. The ONSC also emphasized Apotex’s admission that that there had been no changes to the facts underlying its allegations.

The Supreme Court did not Intend Promised-based Claims of Patent Invalidity to Survive AstraZeneca

The ONSC found that it is “counterintuitive” that the Supreme Court would intend for promise-based arguments to survive the banishing of the doctrine by being imported into claims of overbreadth, insufficiency, or misrepresentation. The ONSC concluded that “a party cannot change what was really a promise based pleading into one that could result in invalidity under s. 27 or 53, even though the Supreme Court recognized that there are “mischiefs” that could fall under those heads.”

On the issue of Apotex’s allegations of willful misrepresentation, the Court held that Apotex had failed to meet the requirements of section 53 of the Patent Act. In light of the seriousness of the assertion, allegations of fraud must “set out precisely” each alleged wrongful act, including the “when, what, by whom and to whom” of the relevant circumstances, and be plead with “full particularity”.

Apotex failed to meet this standard. It had expressly admitted that it had “merely recycled” its Promise Doctrine allegations, and specifically acknowledged that its section 53 fraud allegations were not informed by anything other than AstraZeneca.

In light of the severe prejudice that the defendants would have faced if these unfounded allegations were permitted to be advanced, the Court awarded heightened costs against Apotex.

Link to decision:

Apotex Inc. v. Abbott Laboratories, Limited et al, 2018 ONSC 5199

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