Connaught Laboratories Ltd. v. Smithkline Beecham Pharma Inc., docket T-1290-98

Date: 1998-12-18

Docket: T-1290-98

BETWEEN:

     CONNAUGHT LABORATORIES LIMITED

                                     Plaintiff

     - and -

     SMITHKLINE BEECHAM PHARMA INC.

                                     Defendant

     REASONS FOR JUDGMENT

GIBSON J.

INTRODUCTION

[1]      These reasons arise out of a motion appealing, in part, an order of Associate Senior Prothonotary Giles dated the 9^th of October, 1998. The appeal is brought pursuant to Rule 51 of the Federal Court Rules, 1998.¹ The portion of the order of Mr. Giles that is appealed from is the denial of the defendant"s ("SKB") application for an order striking out the plaintiff"s ("Connaught") statement of claim, in its entirety, without leave to amend, and dismissing this action.

RELIEF SOUGHT AND GROUNDS

[2]      SKB seeks the following relief:

a)      an Order setting aside the Order, in part, of Associate Senior Prothonotary Giles dated October 9, 1998;

b)      an Order striking out the Statement of Claim herein in its entirety without leave to amend and dismissing this action;

c)      an Order granting SKB its costs of this action including this motion; and

d)      such further and other relief as may to this Honourable Court seem just.

The grounds urged in support of SKB"s appeal are the following:

Mr. Giles erred in refusing to strike out the Statement of Claim and dismiss the action herein in that:

(a)      he misdirected himself as to the relevant legal principles applicable to and criteria necessary for maintaining an action on a quia timet basis;

(b)      he erroneously held that the mere fact that SKB had, two years previously, obtained a Notice of Compliance constituted a threat of infringement sufficient to found a cause of action on a quia timet basis;

(c)      he failed to correctly interpret and apply the recent jurisprudence of this Court which has denied speculative and premature allegations of patent infringement.

BACKGROUND

[1]      On the 17^th of December, 1996, a Notice of Compliance ("NOC") was issued pursuant to the Patented Medicines (Notice of Compliance) Regulations² to SKB for a diphtheria, tetanus and acellular pertussis vaccine. The impact of the NOC is, essentially, that SKB is authorized to market the vaccine in Canada. The vaccine is manufactured in Belgium by a company related to SKB. It is marketed in the United States and other countries but not in Canada. No steps toward marketing in Canada by SKB, other than the obtaining of the NOC, are alleged in the Statement of Claim.

[2]      On the 23^rd of June, 1998, a patent was issued to Connaught for an invention entitled "Purification of a Pertussis Outer Membrane Protein". Connaught alleges that, if SKB were to market in Canada the vaccine for which it has received an NOC, it would infringe the patent.

[3]      On the day following the issue of the patent, that is, the 24^th of June, 1998, the Statement of Claim in this matter, since amended, was filed. It was served two (2) days later.

STANDARD OF REVIEW

[4]      The Standard of Review of a discretionary decision of a Prothonotary is now well established. In Canada v. Aqua-Gem Investments Ltd.³, Mr. Justice MacGuigan wrote at page 463:

...discretionary orders of prothonotaries ought not to be disturbed on appeal to a judge unless:

a)      they are clearly wrong, in the sense that the exercise of discretion by the prothonotary was based upon a wrong principle or upon a misapprehension of the facts, or

b)      they raise questions vital to the final issue of the case.

Mr. Justice MacGuigan continued at pages 464-5 as follows:

The question before the prothonotary in the case at bar can be considered interlocutory only because the prothonotary decided it in favour of the appellant. If he had decided it for the respondent, it would itself have been a final decision of the case: ... . It seems to me that a decision which can thus be either interlocutory or final depending on how it is decided, even if interlocutory because of the result, must nevertheless be considered vital to the final resolution of the case. Another way of putting the matter would be to say that for the test as to relevance to the final issue of the case, the issue to be decided should be looked to before the question is answered by the prothonotary, whereas that as to whether it is interlocutory or final (which is purely a pro forma matter) should be put after the prothonotary"s decision. Any other approach, it seems to me, would reduce the more substantial question of "vital to the issue of the case" to the merely procedural issue of interlocutory or final, and preserve all interlocutory rulings from attack (except in relation to errors of law).                  [emphasis in the original, citations omitted]

Clearly, if Mr. Giles had struck Connaught"s Statement of Claim in its entirety, without leave to amend, and dismissed this action as he was invited to do, against the tests enunciated in Aqua-Gem, the discretionary order would have raised a question vital to the final issue of the case. The case would have been finally disposed of.

[5]      Against the test in Aqua-Gem, I conclude that the appeal before me raises a question of wrong principle, which includes error of law, as well as a question vital to the final issue in this case. In the result, I will deal with this appeal on the basis that it should be concluded on the exercise of my discretion, de novo.

STRIKING PLEADINGS

[6]      Rule 221 of the Federal Court Rules, 1998 provides that one of the grounds on which the Court may strike a pleading is that the pleading discloses no reasonable cause of action. Another is that the pleading is otherwise an abuse of the Court"s process. Counsel for SKB urges that Connaught"s Amended Statement of Claim should be struck on either or both of these grounds.

[7]      The onus on an applicant to strike a pleading is a heavy one. In Hunt v. Carey Canada Inc. ,⁴ Madame Justice Wilson described the test in the following terms:

...assuming that the facts as stated in the statement of claim can be proved, is it "plain and obvious" that the plaintiff"s statement of claim discloses no reasonable cause of action? As in England, if there is a chance that the plaintiff might succeed, then the plaintiff should not be "driven from the judgment seat". Neither the length and complexity of the issues, the novelty of the cause of action, nor the potential for the defendant to present a strong defence should prevent the plaintiff from proceeding with his or her case. Only if the action is certain to fail because it contains a radical defect ranking with the others listing in [the relevant British Columbia rule of Court] should the relevant portions of a plaintiff"s statement of claim be struck out ... .

While Madame Justice Wilson was referring particularly to striking where no reasonable cause of action is disclosed, I am satisfied, and I think it is implicit in her reference to "... a radical defect ranking with the others...", that an equally high onus applies with respect to striking for an abuse of the process of the Court.

[8]      Counsel for SKB urges that the onus is met because this quia timet action is based on very hypothetical concerns, particularly because it has now been some two years since SKB received the NOC for its vaccine, no marketing activity in that period is alleged in the Statement of Claim and further, no steps toward marketing of the vaccine are alleged. By contrast, counsel for Connaught urges that the onus is not met because SKB went to the trouble and expense to obtain the NOC and it should therefore be presumed that it will, at the first reasonable opportunity, market the vaccine, particularly in light of the manufacturing activity in Belgium and the marketing activity in other countries.

QUIA TIMET PROCEEDINGS

[9]      Counsel for SKB acknowledged that this Court has jurisdiction to entertain quia timet proceedings in intellectual property disputes. In the result, what is at issue is whether or not the conditions for a valid quia timet action are demonstrated on the face of the Amended Statement of Claim herein.

[10]      In Frearson v. Loe,⁵ Jessel, M. R. wrote at page 65:

I now come to the next point in the defence, which, after all we have heard, is certainly rather a singular one, namely, that there is no infringement. Now, I am not aware of any suit or action in the Court of Chancery which has been successful on the part of a patentee without infringement having been proved; but in my opinion, on principle, there is no reason why a patentee should not succeed in obtaining an injunction without proving actual infringement. I think so for this reason. Where the Defendant alleges an intention to infringe, and claims the right to infringe, the mischief done by the threatened infringement of the patent is very great, and I see no reason why a patentee should not be entitled to the same protection as every other person is entitled to claim from the Court from threatened injury where that threatened injury will be very serious. No part of the jurisdiction of the old Court of Chancery was considered more valuable than that exercise of jurisdiction which prevented material injury being inflicted, and no subject was more frequently the cause of bills for injunction than the class of cases which were brought to restrain threatened injury as distinguished from injury which was already accomplished. It seems to me, when you consider the nature of a patent right, that where there is a deliberate intention expressed and about to be carried into execution to infringe certain letters patent under the claim of a right to use the invention patented, the Plaintiff is entitled to come to this Court to restrain that threatened injury. Of course it must be plain that what is threatened to be done is an infringement.                          [emphasis added]

[11]      In Attorney General v. Corporation of Manchester⁶, not an intellectual property case, Chitty, J. wrote at page 92:

The principle which I think may be properly and safely extracted from the quia timet authorities is, that the plaintiff must show a strong case of probability that the apprehended mischief will, in fact, arise. [emphasis added]

[12]      Chitty J."s words just quoted were quoted, apparently with approval, by Anglin J. in Matthew v. Guardian Assurance Co.⁷ Mr. Justice Collier of this Court referred to the same words of Chitty J. as authority for the following proposition:

In my view the plaintiff, in paragraph 10, is really seeking a form of quia timet relief. To obtain injunctive relief against that type of threatened or apprehended harm there must, in my opinion, be pleaded cogent precise material facts and not mere vague, skimpy allegations as done here.8                  [emphasis added]

[13]      In Fletcher v. Bealey,⁹ Pearson J. wrote at page 698:

I do not think, therefore, that I shall be very far wrong if I lay it down that there are at least two necessary ingredients for a quia timet action. There must, if no actual damage is proved, be proof of imminent danger, and there must also be proof that the apprehended damage will, if it comes, be very substantial. I should almost say it must be proved that it will be irreparable, because, if the danger is not proved to be so imminent that no one can doubt that, if the remedy is delayed, the damage will be suffered, I think it must be shewn that, if the damage does occur at any time, it will come in such a way and under such circumstances that it will be impossible for the Plaintiff to protect himself against it if relief is denied to him in a quia timet action.                              [emphasis added]

Once again, Fletcher v. Bealy was not an intellectual property dispute.

[14]      I turn then to more recent cases in this Court.

[15]      In Sulco Industries Ltd. v. Jim Scharf Holdings Ltd.,¹⁰ Mr. Justice Rothstein, by reference to Attorney General v. The Corporation of Manchester, supra, and Matthew v. Guardian Assurance Co., supra, wrote at page 172:

For an applicant to succeed, the Court must be persuaded that there is a high probability that what the applicant seeks to enjoin will take place.

[16]      In Merck and Co. v. Apotex Inc.,¹¹ Rothstein J. wrote at page 516:

I think these paragraphs must be struck out for two reasons. First, the pleadings are only intended to enable the plaintiffs to get to discovery to bootstrap their claim; while discovery is for the purpose of obtaining admissions from the other party and ascertaining the position of the other party, it is not a fishing expedition simpliciter, which is what it would be used for here. Second, the threat, even if it could be substantiated, is approximately one year away according to Plaintiffs" counsel. At best these paragraphs are premature.

On the facts before him, Rothstein J. noted that Merck had written to Apotex asking if it would infringe in the future and Apotex had not responded.

[17]      Finally, in Faulding (Canada) Inc. v. Pharmacia S.p.A.¹², Reed J. wrote:

Claims for infringement that are premised on indefinite acts in the future are in the realm of speculation. As such they are premature and should be struck out:... . Similarly, pleas founded on the "intention" of a party to do certain acts are improper and will be struck: ... .                      [citations omitted]

ANALYSIS AND CONCLUSION

[18]      From the foregoing authorities, I derive the following criteria for allegations that must be evident on the face of a statement of claim initiating a quia timet proceedings alleging patent infringement: the statement of claim must allege a deliberate expressed intention to engage in activity the result of which would raise a strong possibility of infringement; the activity to be engaged in must be alleged to be imminent and the resulting damage to the plaintiff must be alleged to be very substantial if not irreparable; and, finally, the facts pleaded must be cogent, precise and material. It is not sufficient that they be indefinite or speak only of intention or amount to mere speculation.

[19]      Against the foregoing criteria, I find no facts pleaded in the Amended Statement of Claim herein that speak to a deliberate intention nor can I find facts pleaded that go to imminent damage. Rather, I determine the facts pleaded speak to speculation based solely on the facts that SKB obtained an NOC for its vaccine some two years ago, it is related to a manufacturer of the vaccine in Belgium, and the vaccine is marketed in countries other than Canada. No facts are alleged that speak to a deliberate intention expressed since the NOC was issued. No correspondence was directed to SKB following the issuance of the Connaught patent seeking advice as to SKB"s intentions based upon its NOC. Nor was any such correspondence not responded to as in the Merck and Co. v. Apotex Inc. decision, supra. No imminent allegedly infringing action is pleaded.

[20]      Counsel for Connaught referred me to Dableh v. Ontario Hydro¹³ where the Federal Court of Appeal wrote at page 152:

Whatever the reason for, or merits of, the Trial Judge"s refusal of an injunction, it is our view that, finding as we do that there could be potential infringement , it is appropriate in a final judgment to grant a quia timet injunction..      [emphasis added]

Counsel for Connaught urged that this is binding authority that, if there could be potential infringement, imminent or otherwise, then this action should be allowed to proceed. I cannot agree with the submissions of counsel in this regard. At page 151, of the Dableh decision, the Court wrote:

There appears to be enough evidence to indicate a real probability that the respondent would facilitate an unlicensed use by Hydro Quebec and/or New Brunswick Power, and therefore the issue of permanent quia timet injunction is warranted.                              [emphasis added]

[21]      Reading the two passages together, I cannot conclude that the Court of Appeal supported the issuance of a permanent quia timet injunction in circumstances where the allegations on the face of the Statement of Claim and established at trial are mere speculation and certainly not imminent.

[22]      Based on the foregoing, I conclude that SKB has met the heavy onus on it on an application to strike a pleading and that Connaught has failed to allege on the face of its Amended Statement of Claim a proper basis for this quia timet action. In the result, both on the ground that the Amended Statement of Claim discloses no reasonable cause of action and that it is otherwise an abuse of the process of the Court, this appeal from a portion of the order of Associate Senior Prothonotary Giles herein dated the 9^th of October, 1998 will be allowed and the Amended Statement of Claim herein will be struck in its entirety without leave to amend. In the result, this action will be dismissed. None of my conclusions herein should be read as in any sense foreclosing a further action by Connaught, even on a quia timet basis, if more significant evidence of an expressed intention on the part of SKB to imminently market its vaccine in Canada, with a strong resultant probability of infringement of Connaught"s patent, can be pleaded.

[23]      SKB is entitled to its costs of this action, including its costs of this motion.

                         __________________________________                                  Judge

Ottawa, Ontario

December 18, 1998

__________________

¹      SOR/98 - 106.

²      SOR/93-133.

³      [1993] 2 F.C. 425 (F.C.A.).

⁴      [1990] 2 S.C.R. 959 at 980.

⁵      (1878), 9 Ch. D. 48.

⁶      [1893] 2 Ch. D. 87.

⁷      (1918), 58 S.C.R. 47 at 61.

⁸      See BMI Canada Limited v. Der [1976] 2 F.C. 387 at 393 (F.C.T.D.).

⁹      (1884), 28 Ch. D. 688.

¹⁰      (1996), 68 C.P.R. (3d) 170 (F.C.T.D.).

¹¹      (1997), 72 C.P.R. (3d) 515 (F.C.T.D.).

¹²      [1998] F.C.J. No. 1084 (F.C.T.D.).

¹³      (1996), 68 C.P.R. (3d) 129 (F.C.A.).