Alza Corp. v. Apotex Inc., docket T-470-96

Date: 19980702

Docket: T-470-96

BETWEEN:

                                                     ALZA CORPORATION and

                                                                   BAYER INC.

                                                                                                                                        Applicants

                                                                        - and -

                                                             APOTEX INC. and

                          THE MINISTER OF NATIONAL HEALTH AND WELFARE

                                                                                                                                  Respondents

                                                        REASONS FOR ORDER

REED, J.:

[1]         By order dated March 11, 1998, Mr. Justice Hugessen required the applicants to show cause why the within application should not be dismissed for undue delay in its prosecution.

Facts

[2]         The applicants commenced this proceeding on February 26, 1996, seeking an order prohibiting the Minister of National Health and Welfare from issuing a Notice of Compliance ("NOC") to the respondent Apotex ("the respondent") with respect to certain Nifedipine tablets. The order is sought pursuant to the Patented Medicines (Notice of Compliance) Regulations, SOR 93/133.

[3]         The procedure applicable under those regulations has been described in numerous cases and it is not necessary to repeat the description here. It is sufficient to say that the Minister cannot issue an NOC for a drug to which a listed patent relates unless an allegation of non-infringement is before him as part of the new drug submission, and notice of that allegation has been sent to the patent holder. The present application was commenced in response to a Notice of Allegation, dated January 5, 1996, sent by the respondent to the applicants. It alleged that the manufacture and sale of the tablets for which the respondent sought an NOC from the Minister would not infringe Canadian letters patents 1,074,653 and 1,222,956 because the tablets would not be osmotic devices.

[4]         On April 9, 1996, Madame Justice McGillis issued a confidentiality order with respect to some of the evidence the parties would be filing. She also ordered that Apotex file its evidence before June 27, 1996, and that the parties apply to the Court within four weeks after that occurrence for further directions with respect to the scheduling of the application.

[5]         On May 3, 1996, counsel for the respondent wrote to counsel for the applicants advising them that the respondent intended to withdraw the allegation that was then before the Minister and that was the subject of the Notice of Allegation. He advised that his client was developing a new formulation for the tablets and he presumed that the within application would be withdrawn once confirmation was given that the then existing allegation had been withdrawn. The Minister would thereafter automatically be precluded from issuing an NOC until a further allegation was filed, which allegation if challenged by the applicants is shown to be justified.

[6]         On June 25, 1996, counsel for the respondent wrote to counsel for the applicants confirming that the allegation had been withdrawn. He noted that if Apotex decided to pursue an NOC for Nifedipine it would do so by way of another allegation. He asked whether the applicants would discontinue the within application. Counsel for applicants responded on June 26, 1996, that they were seeking instructions from their client. Counsel for the respondent subsequently sent five letters, dated respectively July 9 and 24, August 1, 13 and 29, 1996, seeking a response to the June 25, 1996 letter. On September 3, 1996, counsel for the applicants advised that she had not yet received instructions from her clients.

[7]         On September 16, 1996, counsel for the applicants wrote that her clients could not determine what position to take with respect to a discontinuance until they had information concerning both the respondent's old and new formulations for the tablets. She stated that this was being sought in order to enable her clients to determine whether the new formulation was materially different from the old.

[8]         Counsel for the respondent replied on September 18, 1996, stating that he did not understand why such information was necessary "so long as the existing allegation is withdrawn and so long as a new allegation (restarting the whole process) will be given?"

Counsel for the respondent again asked applicants' counsel to obtain instructions for a discontinuance of the within proceeding.

[9]         The request for information concerning both the old and the new formulations was reiterated on October 8, 1996. Counsel for the applicants stated that if the second allegation was not materially different from the first, an abuse of process might exist. Counsel for the respondent wrote, on October 10, 1996, giving as a reason for the withdrawal of the first allegation, the explanation that the formulation to which it related did not satisfy the Health Protection Branch requirements. He stated that it was open to his client to withdraw that formulation and start again. He added that an argument on abuse of process would be available to the applicants in the context of a prohibition application relating to any second allegation that the respondent might file.

[10]       The letter of October 10, 1996, was responded to on October 22, 1996. It advised that one of the applicants' three counsel of record was away from the office, but that the letter of October 10 would be brought to his attention when he returned the following week. Counsel for the respondent subsequently sent letters dated November 11, 1996, and January 7, 1997, seeking a response to his October 10, 1996 letter.

[11]       I should note that throughout this period the Federal Court Registry was communicating with counsel, first with counsel for the respondent on July 31, 1996, and then with counsel for the applicants, from September 13, 1996 to January 14, 1997, seeking an explanation as to why no further steps in the proceeding were being taken.

[12]       On January 7, 1997, counsel for the applicants responded to the October 10, 1996 letter from counsel for the respondent. With respect to the reference to the alleged failure to meet the Health Protection Branch requirements, counsel for the applicants stated that since no information had been provided with respect to that assertion, he was not in a position to agree or disagree with it. He again sought information about the respondent's two formulations, so that Bayer could assess whether the second was materially different from the first.

[13]       On February 10, 1997, counsel for the respondent, by letter, reiterated his view that the further information requested by the applicants was unnecessary. At the same time, details were provided of the formulation that had been withdrawn. The details were given to counsel on a confidential basis for the purpose of resolving the present proceeding. On February 25, 1997, and on March 10, 1997, counsel for the respondents sent follow-up letters seeking a response to this February 10, 1997 letter.

[14]       On March 27, 1997, counsel for the applicants responded. He asserted that there was still insufficient information provided by the respondent and he proposed that the application be disposed of by the respondent consenting to a prohibition order following the approach that had been adopted in AB Hassle v. Canada (Minister of National Health and Welfare) (1995), 52 C.P.R. (3d) 3 (F.C.T.D.). In that case it was held that the withdrawal of an allegation indicated a concession of infringement and, therefore, the application to which the allegation related should be disposed of by a prohibition order.

Counsel for the respondent advised on April 4, 1997, that this proposal was not acceptable. Reference was made to the decisions in AB Hassle v. Canada (Minister of National Health and Welfare) (1997), 72 C.P.R. (3d) 318 (F.C.T.D.) and Merck Frosst v. Canada, (1997) 72 C.P.R. (3d) 468 (F.C.T.D.). In the former, at 324 and 326-7, Mr. Justice Nadon declined to issue a prohibition order in the case of a withdrawal of an allegation. He decided that the withdrawal of the allegation rendered the application moot. He held that the facts before him did not support a conclusion that the withdrawal constituted a concession that infringement existed:               In Hassle, supra, Justice Richard interpreted the withdrawal of the notice as an admission that the allegations therein were not justified. However, in the case before me there are cogent facts which explain why this notice of allegation was withdrawn. I do not interpret the withdrawal as an admission. In this case the only effect of the withdrawal is to render the proceeding moot. Had I not concluded that the matter is moot I would have concluded, as Richard J. did in Hassle, supra, that none of the allegations are justified.

[15]       In the Merck Frosst decision, Mr. Justice Rothstein held that when a second allegation was withdrawn this rendered the proceeding to which it related moot. He held that there remained no adversarial issue having a logical nexus to the proceedings, and that a prohibition order is solely related to the application which gave rise to it, provided that the allegations are in no way interdependent.^[1]

[16]       On June 3, 1997, counsel for the respondent once again wrote to the applicants' counsel. He sought a response to his April 4, 1997 letter. In the meantime, the Registry having had numerous conversations with counsel as to the status of the file, advised counsel that the Registry would be issuing a Rule 1606 letter. Such a letter was sent to counsel for the applicants on May 30, 1997. It reads:             . . .

On February 26, 1996, an Originating Notice of Motion for judicial review pursuant to Section 18.1 of the Federal Court Act was filed in the aforementioned matter.

I would draw your attention to Rule 1606(1) which provides for the filing of an application record and reads as follows:

"Rule 1606.(1) The applicant shall, within 60 days after filing the notice of motion,

(a) file the number of copies of its application record required under Rule 1609(2); and

(b) serve a copy of its application record on all other parties."

To date no such record or motion for an extension of time has been filed.

Would you please advise the Registry whether or not it is your intention to pursue the application.

As well, an order was rendered by Madame Justice McGillis on April 9, 1996 whereby the Respondents were to file evidence by June 27, 1996. We note that this has not been taken care of either.

The Court has directed the Registry to advise you that unless steps are taken within three weeks of the date of this letter, the Court will consider issuing an order to show cause why the application should not be dismissed for want of prosecution pursuant to Rule 1617.

[17]       On June 25, 1997, the applicants filed a notice of motion, returnable July 14, 1997, for an order for a timetable pursuant to Madame Justice McGillis' April 9, 1996 order, a timetable for the hearing of a motion to establish the terms on which the within application should be disposed of given the withdrawal by the respondent of its allegation. The terms contemplated by the applicants were that the Minister be prohibited from issuing an NOC to the respondent with respect to a second formulation of the drug in question, unless the second formulation was materially different from that which had been withdrawn. On July 14, 1997, the motion was subsequently adjourned, on consent, by letters from counsel for the applicants to the Registry, first, from July 14 to August 11, then from August 11 to September 8, from September 8 to September 15, from September 15 to September 22, from September 22 to September 29, from September 29 to October 20, 1997, from October 20 to November 10, from November 10 to November 17, and from November 17, 1997, sine die.

[18]       During part of the September to November 1997 period correspondence passed between the parties with respect to a proposed resolution of the dispute between them. Counsel for the applicants sent a letter dated September 10, 1997, with a proposal contained therein. Counsel for the respondent responded with a counter offer on September 12, 1997. A revised proposal was sent by counsel for the applicants on September 17, 1997, and this was responded to by counsel for the respondent on September 19, 1997. As of that date two matters that were left unresolved: the name of the drug to be identified in the discontinuance order and an amount of about $7,500 with respect to costs.

[19]       No response was received to counsel for the respondent's letter of September 19, 1997, until March 5, 1998. That response insisted that a term of any discontinuance be that any second formulation be different (no longer materially different) from that which had been withdrawn in June of 1996. In the meantime, the respondent had served the applicants with a new Notice of Allegation with respect to the new formulation for the Nifedipine tablets. This occurred on January 23, 1998. It alleged that the new formulation was not an osmotic device.

[20]       The applicants filed an application for an order of prohibition to prevent the Minister issuing an NOC with respect to Nifedipine tablets based on the new formulation and new allegation. This application carries file number T-420-98 and was commenced on March 13, 1998.

[21]       As noted, Mr. Justice Hugessen, on March 11, 1998, had ordered the applicants to show cause why the within application should not be dismissed for want of prosecution. They were ordered to show cause in writing by April 15, 1998. Following the issuance of that order, the applicants filed a notice of motion on April 6, 1998, returnable on April 14, 1998, one day before the show cause submissions were due, for the issuance of an order of prohibition in the within application. The order of prohibition sought was expressed to be conditional until the respondent amended or filed a new drug submission that referred to a second formulation that was not materially the same as the formulation at issue in the within proceeding; and that it continue until the respondent establish to the Court, on a balance of probabilities, that the second formulation was not essentially the same as and was separate and distinctive from the first formulation. Apotex brought a cross-motion for dismissal of the within application on the ground that it was moot and because the show cause had not been dealt with. On April 14, 1998, Madame Justice McGillis adjourned both motions, pending disposition of the show cause order.

[22]       On May 1, 1998, Mr. Justice Nadon, having reviewed the written submissions of counsel on the show cause, ordered an oral hearing.

Federal Court Rule1617

[23]       Rule 1617 of the Federal Court Rules provides:

      (1) The Court may, on application or its own initiative, by order, dismiss an application for judicial review by reason of the applicant's undue delay in prosecuting it.

     (2) The applicant and other parties shall be given at least 10 days notice and an opportunity to be heard before an order is made under paragraph (1).

Applicants' Arguments

[24]       Counsel for the applicants' arguments are: (1) there was no undue delay in prosecuting the application because it has been known since June 1996 that the application would not be prosecuted - all that was in issue after that date were the terms on which the application would be discontinued; (2) the applicants were not in default because Madame Justice McGillis' order of April 9, 1996, only required that further directions with respect to scheduling be sought within four weeks after the respondent filed its evidence and the respondent has never done so; (3) there is no public interest affected in this case by the passage of time and the passage of time cannot have constituted unreasonable delay because when the allegation was withdrawn the Minister was automatically precluded from issuing an NOC to the respondent; (4) under the relevant regulations 30 months is allowed for the prosecution of an application for a prohibition order; (5) the applicants would be prejudiced if the respondents' second allegation is not materially different from that which was withdrawn; (6) if the second formulation is not materially different (now different) there is reason to be concerned that the filing of the second allegation is an abuse of process; (7) equities call for a refusal to dismiss the application.

Consideration of the Applicants' Arguments

[25]       The term "prosecuting it" in Rule 1617 encompasses the whole of a proceeding from the time it is commenced by its originating document until finally disposed of by order of the Court or discontinued on the consent of the parties. A proceeding is only finally disposed of when an order issues either granting the request that is sought in the application or dismissing that request, or when a discontinuance is filed. Delay in proceeding to have the application finally disposed of, after the date it was known that the first allegation had been withdrawn, comes within the terms of Subrule 1617(1).

[26]       While Madame Justice McGillis' order required the parties to return to the Court for further directions within four weeks after the respondent filed its evidence, the failure of the respondent to file evidence does not excuse subsequent inaction by the applicants. As counsel for the respondent argued, the respondent has no absolute obligation to file evidence; the June 27, 1996 date was only a date after which such evidence could not be filed. The respondent is entitled to abandon its first allegation if it chooses. This it did. In my view, the responsibility to initiate the next procedural step, at this point, is with the applicants. The applicants have carriage of the proceeding. While Bayer argues that Apotex is equally at fault for the delay since it could have applied to the Court for an order dismissing the application for mootness, delay by both parties is still delay.

[27]       I agree that there is no public interest specific to this case affected by the delay. There is a general public interest, however, in having proceedings before the courts proceed expeditiously. Even though the parties involved may not be concerned about the lapse of time involved in disposing of a given Court proceeding, the Court and the public are concerned. There were wasted public funds in the present case to the extent that Registry staff spent needless time on this file and to the extent that members of the Court spent time reviewing the much adjourned motion of June 25, 1997. In any event, the incorporation of a requirement that there be a case specific public interest element present when applying Rule 1617(1) is to add a gloss to that Rule that its text does not support.

[28]       I have not been persuaded that the thirty month injunction limitation provided for by the Notice of Compliance Regulations, section 7(1)(e), was intended to absolve the parties from proceeding expeditiously to resolve a contested allegation.

[29]       With respect to the argument that the applicants would be prejudiced if the formulation to which the respondent's second allegation relates is not materially different from that which was withdrawn, no affidavit has been filed in support of that claim. The prejudice that would arise has not been identified, except for the time and cost involved in pursuing the application based on the withdrawn allegation, and these can be compensated by an award of costs.

[30]       In the A.B. Hassle decision (1995), the facts indicated that the withdrawal of the first allegation and the substitution of a second was an attempt to escape a time limitation that had inadvertently been ignored. Thus, the refiling could be characterized as an abuse of process. But there is no such factual underpinning on this file to support such a characterization of the withdrawal and subsequent refiling. While both allegations are the same (the tablets are not osmotic devices), this does not mean that the formulations themselves are the same, or that an abuse of process occurred in the withdrawal and subsequent refiling. The existence of such can, in any event, be argued in the context of the application on file T-420-98, if the applicants wish to pursue that argument.

[31]       Counsel for the applicants argues that the equities are in favour of his clients. As I understand this argument it proceeds on two bases: he alleges that he was misled by counsel for the respondent's February 10, 1997 letter; he alleges that both parties have not been very concerned about finally disposing of this application - it was not a high priority with either of them. In those circumstances, it is argued it would be inappropriate to dismiss the applicants' case for delay in prosecuting it.

[32]       With respect to the February 10, 1997 letter, I was asked to accept the confidential portion of the letter into evidence at the hearing, in an informal way, i.e., without a supporting affidavit and without the other side being given an opportunity to cross-examine on any affidavit evidence that might have been filed. I declined to accept evidence in this way. Indeed, it was brought to my attention that a motion had been brought the previous week by the applicants, albeit in the T-420-88 application, to have the confidential status of the portion of the letter in question removed, which motion was adjourned sine die at the applicants' request. The letter has been in existence for a long time. Counsel have known of the show cause order for a long time. To seek to file the additional evidence, at the last minute, without any supporting affidavit attesting to the prejudice it is supposed to show, is to say the least a strange way of proceeding. I declined to accept the proffered evidence.

[33]       With respect to the argument that neither party considered final disposition of this application to be a priority matter, as noted above, this is not an answer to the delay that has been identified. Mutual delay in seeking to have an application finally disposed of does not excuse that delay, nor does it create equities for one party or the other.

Conclusion

[34]       "Undue delay" in Rule 1617 had been interpreted to mean a significant period of delay without reasonable excuse. It is not necessary to establish that the delay resulted in prejudice to one or other of the parties, see: Bellefeuille v. Commercial Transport (Northern) Ltd. (1994), 81 F.T.R. 317 (F.C.A.), affirming (1994), 82 F.T.R. 22. Settlement discussions are also not necessarily an excuse to justify non-compliance with the Rules, see: Jazz Inspiration Ltd. v. Canada (Attorney General), August 21, 1995, T-2210-91:

[5]             . . . . Obviously, the fact that settlement discussions are taking place does not preclude either party from ensuring that the requirements of the Rules are satisfied in the event that settlement discussions are unsuccessful. This is more or less what occurred herein. Between October 1992 and November 1994, there is no evidence of any activities among the parties. In November 1994, the CRTC advised in writing that no settlement was possible. Despite the Order of the Federal Court of Appeal, the applicant did nothing for approximately 4 to 5 months in relation to this judicial review application that was commenced on August 27, 1991.

[35]                   In this case, two years elapsed without significant procedural steps being taken to move the application to its final disposition even though it was known that the underlying substratum of the application had disappeared. The reasons given for that delay cannot be characterized as reasonable excuse. In such circumstances it is appropriate to dismiss the application pursuant to Rule 1617. An order will issue accordingly.

Judge

OTTAWA, ONTARIO

July 2, 1998

FEDERAL COURT OF CANADA TRIAL DIVISION

NAMES OF SOLICITORS AND SOLICITORS ON THE RECORD

COURT FILE NO.:                         T-470-96

STYLE OF CAUSE:                       ALZA CORPORATION ET AL v.

APOTEX INC. ET AL

PLACE OF HEARING:                   Toronto, Ontario

DATE OF HEARING:                     June 16, 1998

REASONS FOR ORDER OF THE HONOURABLE MADAME JUSTICE REED DATED:           July 2, 1998

APPEARANCES

Mr. Neil R. Belmore                                                                   FOR APPLICANTS

Mr. Andrew R. Brodkin                                                                   FOR RESPONDENT APOTEX

SOLICITORS OF RECORD:

Gowling, Strathy & Henderson

Toronto, Ontario                                                                    FOR APPLICANTS

Goodman, Phillips & Vineberg

Toronto, Ontario                                                                               FOR RESPONDENT APOTEX

Morris Rosenberg

Deputy Attorney General of Canada                                           FOR RESPONDENT MINISTER