For the first time, the Federal Court has disentitled compensation pursuant to section 8 of the Regulations on the basis of infringement of a patent. This holding was also based on the court’s finding that Apotex would not have had an available non-infringing alternative (NIA) at any point during the period of infringement (September 5, 2003 to December 3, 2008). Additionally, the court 1) permitted AstraZeneca to fully recover profits for infringing sales exported to the US, less a deduction for payment made pursuant to a US judgment for infringement of a corresponding US patent; and 2) set the rate of “profits on profits” at the prime bank rate, compounded annually.
Case: AstraZeneca Canada Inc et al v Apotex Inc, 2017 FC 726
Drug: LOSEC® (omeprazole)
Nature of case: Reference addressing damages for patent infringement and damages pursuant to section 8 of the Patented Medicines (Notice of Compliance) Regulations (Regulations)
Successful party: AstraZeneca et al.
Date of decision: July 26, 2017
Background
This damages reference addressed two prior findings of liability in cases relating to omeprazole, marketed by AstraZeneca as LOSEC®. Apotex sought approval for, and sold its generic Apo-omeprazole tablets in Canada and the US.
As we reported, Apotex was held liable for infringing Canadian Patent No. 1,292,693 (693 Patent), which claims a formulation of omeprazole. As we also reported, AstraZeneca was held liable under section 8 of the Regulations in respect of Canadian Patent No. 2,133,762, which also relates to omeprazole.
The quantification stages of both cases were consolidated and dealt with in this proceeding.
No NIA Available
The court considered whether an accounting of Apotex’s profits for infringement of the 693 Patent should be reduced having regard to several different NIAs that Apotex asserted. In determining whether Apotex “could” and “would” have deployed the alleged NIAs, the court considered whether the NIAs were bioequivalent to LOSEC®, sufficiently stable and would have received regulatory approval. The court answered each question in the negative, emphasizing that real-world actions and events were probative, and none of Apotex’s alleged NIAs, which included alternatives only developed by Apotex in 2015 and third-party suppliers, existed at the relevant period.
Regarding the NIAs developed by Apotex, the court held that these were made in non-commercial scale batches, without full stability, bioequivalence, or clinical data, and Apotex would not have obtained regulatory approval within the infringement period. Further, the court highlighted that in the real world Apotex tried and failed to develop several other non-infringing formulations and Apotex knew or ought to have known that its formulation would infringe the 693 Patent due to prior findings of infringement by courts in the US and Canada in 2002.
The court also found that none of Apotex’s third-party NIAs were viable and cautioned against relying on answers to the bare question of “what would you have done” in the “but for” world. The court preferred instead to draw its own inferences based on evidence regarding the extant factual conditions at the time.
Disentitlement to Damages Under Section 8
The court also considered how to address a prior finding of liability in a section 8 action relating to the same product.
The court rejected Apotex’s argument that, as liability for section 8 damages had already been established, it was not open to the court to redetermine the issue. The court maintained it has a broad discretion under subsection 8(5) of the Regulations to consider all circumstances bearing on the section 8 claim and the ability to craft an appropriate remedy. There was no reason why Apotex should be entitled to compensation under section 8 simply because the finding of liability occurred before the finding of liability for patent infringement. The court concluded that in order to have launched its product earlier, Apotex would have necessarily infringed the 693 Patent, and therefore, it was not entitled to any damages under section 8.
Impact of Recovery in Foreign Proceedings
Apotex had previously been found to have infringed a US patent corresponding to the 693 Patent and had paid damages to that effect. It argued that those damages ought to be exhaustive compensation for all infringing sales in the US such that it should not have to disgorge profits for US sales in the Canadian action.
The court determined that, although foreign judgments should be considered to prevent double-recovery, there was no such double-recovery in this case. The causes of action arose from two different patents, involved distinct acts of infringement during different (but overlapping) time periods, and were tried in jurisdictions with different substantive legal principles. In particular, the availability of a disgorgement of profits was not a remedy available in the US action. Accordingly, the court provided for full disgorgement of Apotex’s US export profits during the full period of infringement, to be offset only by the amount that Apotex already paid in the US litigation.
Profits on Profits
AstraZeneca’s claim included a claim for any profits made on the profits from infringing sales. The parties did not agree on the amount and method of calculating the rate to be applied. The court found that it was not appropriate to rely on transactions between related companies as support for the returns made on profits from infringing sales. The court concluded that the prime bank rate, compounded annually was a more appropriate measure. Apotex argued it was entitled to a deduction for income tax returns, but did not produce any income statements to support its claim. Accordingly, the court found that no deduction for tax returns was warranted.
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