Date:20041020
Docket: T-1169-01
Citation: 2004 FC 1452
BETWEEN:
APOTEX INC.
Plaintiff
- and -
MERCK & CO., INC. and
MERCK FROSST CANADA & CO.
Defendants
AND BETWEEN:
MERCK & CO., INC. and
MERCK FROSST CANADA & CO.
Plaintiffs by Counterclaim
- and -
APOTEX INC. and
HER MAJESTY THE QUEEN IN RIGHT OF CANADA,
as represented by the ATTORNEY GENERAL OF CANADA
Defendants by Counterclaim
REASONS FOR ORDER
ARONOVITCH, P.
[1] There has been a raft of longstanding litigation involving the parties to the underlying action and others, as to whether Apotex' drug, Apo-Lovastatin, is made by a process, using a form of microbe, that infringes the defendants' 380 Patent.
[2] The underlying suit is brought by Apotex pursuant to section 8 of thePatented Medicines (Notice of Compliance) Regulations, SOR / 93-133 (the "NOC Regulations" or "Regulations") for damages suffered by reason of an eleven month delay in the issuance of a Notice of Compliance ("NOC"); an NOC being the means by which marketing approval is given a particular drug, in this case, to Apotex, for the sale of lovastatin under the name Apo-Lovastatin.
[3] Merck has defended and counterclaimed on the basis that Apotex is not entitled to damages under section 8 of the NOC Regulations, alleging that Apotex has infringed the 380 Patent, and would not have been in a position to market non-infringing lovastatin had an NOC issued to Apotex earlier.
[4] The interesting question raised by this motion is whether such a defence will stand in light of what Apotex maintains is an "automatic" or absolute, statutory right to damages.
Apotex argues not, and accordingly has brought this motion to strike paragraphs 39, 40 and 44(b) and (c) of the defendant Merck's statement of defence and counterclaim that allege infringement, and seek a remedy by way of set-off on that account.
BACKGROUND
[5] Some factual background will place the litigation in context. On January 31, 1984, Merck & Co. was granted Canadian Patent No. 1,161,380 (the "380 Patent") for an invention relating to hypocholesteremic fermentation products from the cultivation of a micro-organism of the genus Aspergillus, and Aspergillus terreus in particular. The 380 Patent was licensed to Merck Frosst Canada Inc., a predecessor to Merck Frosst, for the marketing and sale in Canada, of lovastatin tablets made by the above process. On April 6, 1993, Merck Frosst filed a patent list which included the 380 Patent.
[6] On April 19, 1993, Apotex delivered a Notice of Allegation ("NOA"), alleging that it would not infringe the 380 Patent because it would use non-infringing lovastatin made from a non-infringing process developed by its sister company, Apotex Fermentation Inc. ("AFI") using the microbe Coniothyrium fuckelii.
[7] Merck then commenced an application pursuant to section 6 of the NOC Regulations, seeking to prohibit the issuance of an NOC to Apotex in respect of lovastatin tablets (T-1305-93). Merck alleged that the only way Coniothyrium fuckelii could produce commercial quantities of lovastatin was if it had been contaminated with Aspergillus terreus (the microbe used to produce lovastatin in the 380 Patent). As a result of the prohibition proceeding commenced by Merck, the Minister was prevented from issuing an NOC to Apotex until either the dismissal of the proceeding or the expiration of the 30-month statutory stay.
[8] After unsuccessful attempts to extend the date, the statutory stay expired. The prohibition proceeding was accordingly deemed dismissed by order of Justice Rothstein, dated March 26, 1997, on the ground that the Court had lost jurisdiction. There has been no determination of Apotex' allegation of non-infringement in the prohibition proceeding.
[9] Apo-Lovastatin was approvable under the Food and Drug Regulations on or about April 26, 1996. However, due to the prohibition proceedings, Apotex was not issued an NOC until some eleven months thereafter, at the dismissal of the prohibition proceeding, on March 26, 1997.
[10] An action for infringement of the 380 Patent and a related patent was commenced by Merck on June 12, 1997, naming Apotex and AFI as defendants (T-1272-97). I refer to it hereafter as the patent infringement action.
[11] In the patent infringement action, Merck has claimed damages or an accounting of profits for the period commencing when Apotex was issued an NOC (March 26, 1997), and ending with the expiration of the 380 Patent (January 31, 2001). In addition to allegations relating to a chemical process patent, Merck has alleged that the lovastatin in Apo-Lovastatin tablets is either (i) made from Aspergillus terreus; (ii) made from Coniothyrium fuckelii which is actually Aspergillus terreus, or (iii) made from Coniothyrium fuckelii which has been contaminated with Aspergillus terreus. Apotex contends that these allegations are essentially the same allegations as were made in the prohibition proceeding.
[12] Apotex commenced the within section 8 action on June 29, 2001 claiming entitlement to damages for having been kept off the market from April 26, 1996 to March 26, 1997.
THE PLEADINGS AND APOTEX' GROUNDS FOR THE MOTION
[13] The following summarizes paragraphs 39 & 40 of Merck's plea in defence of Apotex' claim:
_ Prior to the expiry of the 380 Patent, Apotex never used a fermentation process, for the manufacture of lovastatin, which did not infringe Merck's patent;
_ Since at least 1994 or 1995, Apotex and AFI have made, offered for sale, and sold lovastatin made from a microbe Aspergillus obscurous which is actually Aspergillus terreus (the microbe used by Merck in the 380 Patent)
_ Apotex did not at any relevant time, develop a commercially viable process for the manufacture of lovastatin using Coniothyrium fuckelii (the microbe Apotex alleged to be using during the prohibition proceeding), nor is it possible to produce lovastatin from Coniothyrium fuckelii in amounts sufficient to supply the Canadian market.
[14] In its counterclaim, more particularly at paragraphs 44(b) & (c), Merck seeks a declaration that the plaintiffs have infringed the 380 Patent. It also asks to set-off against the damages claimed by Apotex, those arising from the infringement of the 380 Patent.
[15] Apotex' motion is brought pursuant to Rule 221(1)(a)(b)(c)(d) and (f) of the Federal Court Rules, 1998. In that order, Apotex maintains that the impugned paragraphs disclose no reasonable defence, are immaterial, redundant, frivolous and vexatious, will delay the fair trial of the section 8 action, and are an abuse of the process of the Court.
[16] Chiefly, Apotex says that it is not a reasonable defence to a section 8 damages action to allege what Apotex refers to as a "theoretical infringement". Of the counterclaim, Apotex says that the declaration of infringement, and the set-off sought by Merck, are an abuse of process as they raise for determination the very same issues that are being litigated by the parties in another proceeding and accordingly, ought not to be permitted to go forward.
[17] In respect of the first aspect of the motion, the reasonableness of the defence, Apotex maintains that a defence based on allegations of infringement is inconsistent with the scheme of the NOC Regulations; in particular, with subsection 8(1) of the NOC Regulations that Apotex characterizes as imposing automatic liability on the first person, and by reason of the clear and overriding terms of subsection 8(3) of the Regulations.
[18] According to Apotex, whether it had a non-infringing process for making lovastatin is irrelevant to the determination of a section 8 action, since proceedings commenced pursuant to the NOC Regulations are unique, separate, and unrelated to determinations of infringement and validity.
[19] Apotex argues that subsection 8(1) is clear that in circumstances such as these, the first person "is liable" to the second person. The provision according to Apotex, imposes an absolute liability on the first person for any losses suffered by the second person, without any requirement for proof of fault, or breach of duty, or infringement. The plaintiff notes that Merck itself has pleaded that section 8 imposes an absolute liability on the first person, thereby conceding that patent infringement is irrelevant to section 8 proceedings.
[20] The lack of relevance of patent infringement to a claim for damages for delay, the necessary disconnect between the two, is said to be evident from the objects of section 6 proceedings as described, among others, by the Court of Appeal in the following passage from Pharmacia Inc. v. Canada (Minister of National Health and Welfare), (1994), 58 C.P.R. (3d), 209 at 216- 217 (F.C.A.):
"The Proceedings are not an action and their object is solely to prohibit the issuance of a Notice of Compliance under the Food and Drug Regulations. Manifestly, they do not constitute "an action for infringement of the patent".
[21] Apotex points out that this Court and the Court of Appeal, have also said of section 6 proceedings; that they "do not preclude a subsequent action for infringement of a patent"; that they "nowhere create or abolish any rights of action between the parties; instead they confer a right on the patentee to bring an application for prohibition against the Minister"; and that the NOC Regulations are "not aimed at providing a forum to adjudicate on issues of infringement or the validity of patents". (See: Pharmacia Inc. v. Canada (Minister of National Health and Welfare), supra at 217 (F.C.A.); Eli Lilly and Co. v. Nu-pharm Inc. (1996), 60 C.P.R. (3d) 1 at 14 (F.C.A.); Eli Lilly and Co. v. Apotex Inc. (1999), 87 C.P.R. (3d) 83 at 93 (F.C.T.D.))
[22] The above jurisprudence is said to bear out that the sole and undisputed object of an action for damages pursuant to section 8 is to compensate the second person for the delay in issuing an NOC due to the first person's institution of prohibition proceedings.
[23] The incongruity of raising patent infringement in the context of a section 8 damages action, according to Apotex, is also evident given the specific provision of subsection 8(3). Apotex notes that subsection 8(3) of the NOC Regulations specifically provides that a section 8 damages award may be granted notwithstanding that the first person has commenced an infringement action, and entitles the second person to be compensated for the losses suffered as a result of the delay in the issuance of its NOC "without regard" to matters of infringement.
[24] Apotex contends that Merck's attempt to defend against the section 8 action with allegations of infringement not only runs afoul of the scheme of the NOC Regulations but is in conflict with the scheme established by the Court of Appeal in AB Hassle v. Canada (Minister of National Health and Welfare) (2002) 7 C.P.R. (4d) 272 at 286-87 and 290-91, as to the rights and obligations of the parties to a prohibition proceeding
[25] This scheme is said to provide safeguards against a patentee commencing an unnecessary and unmeritorious prohibition proceeding by allowing the first person on the basis of the generic's NOA to fully assess whether to engage the Regulations.
[26] For Apotex, the policy underlying the NOC Regulations, as butressed by the jurisprudence, is to balance the rights, liabilities and exposure of the parties in proceeding under the NOC Regulations. If a first person chooses to invoke the Regulations, thereby triggering the statutory stay, and is unsuccessful, it will have to pay the price. Apotex is adamant that the first person can not take out what is a presumptive injunction, lose or prove nothing, and be allowed to defend on the basis that the generic manufacturer would have been an infringer.
[27] The plaintiff argues that if it were permissible for a first person to litigate the broader issue of infringement afresh (having in most cases done so in the context of the prohibition), and the first person were not subject to automatic liability upon dismissal of its prohibition proceeding, there would be no disadvantage or disincentive to the first person in commencing a prohibition proceeding. The first person could obtain the extraordinary remedy of a statutory stay simply by commencing a proceeding under the Regulations, and would expose themselves to little or no risk in so doing.
CONSIDERATION AND COMMENT
[28] Apotex relies upon the Federal Court of Appeal's decision in Prior v. Canada, _1989_ F.C.J. No. 903 ("Prior"), to support its position that the question of whether the NOC Regulations permit Merck's defence involving, as it does, a question of pure law and statutory interpretation may be determined on a motion to strike.
[29] Similarly, Apotex relies upon the decision of Justice Blanchard in Apotex Inc. v. Eli Lilly and Co. (2001), 13 C.P.R. (4th) 78, wherein at paragraph 13, Justice Blanchard declines to decide an issue of statutory interpretation (particularly, a transitional provision, subsection 9(6) of the NOC Regulations and its application to the amended version of section 8 of the NOC Regulations, post-1998) in the following terms:
"I am of the view that the interpretation of section 8 and the determination of its objects is a complex matter of statutory interpretation and is better left for argument at trial where proper evidence may be adduced and should not be disposed of by a motions judge in a preliminary proceeding".
[30] Apotex argues that the basis for Justice Blanchard's decision was that additional evidence was to be adduced at trial on the issues of interpretation, whereas in the present action, Merck has not indicated that it would adduce evidence to establish the reasonableness of its defence at trial. Apotex contends that the record before the Court is sufficient to determine the availability of the defence of infringement, as a straightforward question of law.
[31] Apotex goes on to point out, that the issue for determination here is on all fours with Apotex Inc. v. Eli Lilly and Co. Canada Inc., 2004 FC 502 ("Eli Lilly"), where Justice Heneghan granted partial summary judgment on a pure question of law which did not require to be determined at a full trial on the merits.
[32] I agree with Merck that in the circumstances, there is more proximate jurisprudence than Prior, that bears directly on point, and must be considered. Indeed, this Court and the Court of Appeal have consistently held that contentious issues of statutory interpretation involving section 8 of the NOC Regulations should not be dealt with on motions to strike pleadings, and should instead be left to the trial judge (see: Apotex Inc. v. Eli Lilly & Co., 2001 FCT 636; Apotex Inc. v. Eli Lilly & Co., 2001 FCT 1144, aff'd 2002 FCA 411; Apotex Inc. v. Syntex Pharmaceuticals International Ltd., 2001 FCT 1375; Apotex Inc. v. Merck & Co., 2002 FCT 166; Apotex Inc. v. R., 2003 FCT 414, aff'd 2004 FCA 43; Apotex Inc. v. Merck & Co., 2004 FC 314 aff'd 2004 FCA 298).
[33] Justice Hugessen made a similar finding in Apotex Inc. v. Syntex Pharmaceuticals International Ltd., 2004 FC 383, in the context of a motion for summary judgment, and held that the construction of section 8 of the NOC Regulations (and the transitional provisions relating thereto), was best dealt with by the trial judge so as to give the proper contextual and purposive construction to the relevant texts. He chose to follow the decisions of Justice Russell in Apotex Inc. v. R., 2003 FCT 414, aff'd 2004 FCA 43 and Justice Snider in Apotex Inc. v. Merck & Co., 2004 FC 314.
[34] Justice Heneghan, in Eli Lilly found that the discrete question of what constitutes a "first person" within the meaning of the Regulations did not require a full trial, and could be dealt with on a motion for summary judgment. By contrast, Justice Heneghan dismissed Eli Lilly Canada's motion for summary judgment with respect to Apotex' claim for unjust enrichment in the context of its section 8 action and declined to answer the question of the Court's jurisdiction over a claim for unjust enrichment, holding that this more complex question was best dealt with by the trial judge.
[35] Apotex urges that the interpretation to be given to subsections 8(1) and 8(3) is evident, not complex and presents a discrete question of law that does not require a full trial. According to Apotex, subsection 8(3) is clear that the Court may make an order without regard to an infringement suit, and that subsections 8(4) and (5) are to be read subject to the explicit language of 8(3). The effect of 8(3), contends Apotex, is disjunctive such that a prohibition proceeding and patent infringement action can and must be parallel and not overlapping.
[36] As to the meaning to be given to subsection 8(1), for Apotex, the following statement by Stone J.A., in AB Hassle v. Canada (Minister of Health and Welfare), (2000) 7 C.P.R. (4th) 272, as to the outcome of an unsuccessful prohibition proceeding admits of no equivocation:"where the section 6 proceeding is withdrawn, discontinued or dismissed the patentee is liable to compensate the second person for its loss incurred for the period described in subsection 8(1) of the NOC Regulations."
[37] If one were to summarize the issues raised by this motion they would be, as Merck suggests, namely:
_ whether the former (pre-1998) or current (post-1998) version of section 8 of the NOC Regulations is applicable;
_ whether patent infringement is relevant to a claim for damages or lost profits under section 8;
_ whether the former section 8 precludes the first person from raising defences to a section 8 action;
_ whether the new subsection 8(3) precludes the first person from raising defences to a section 8 action based on the conduct of the second person;
_ whether subsection 8(4) of the NOC Regulations requires the Court to consider patent infringement in determining damages pursuant to section 8;
_ whether subsection 8(5) of the NOC Regulations requires the Court to consider all matters relevant to the section 8 action, including whether the second person (Apotex) infringed the 380 Patent;
_ whether section 8 provides for automatic liability or whether it requires that the second person prove all the elements of liability, including causation; and
_ whether the equitable defence of set-off is available in a section 8 action.
[38] These issues are contentious, and evidently complex. Their determination will include consideration of the history, scope and meaning to be given to the NOC Regulations. As such they should be left to be decided at trial on the basis of a complete factual record and full argument. This, notwithstanding that these issues include for determination questions of pure law (Merck & Co. Inc. v. Apotex Inc. 2004 FCA 298).
[39] The jurisprudence cited for the proposition that issues involving the interpretation of section 8 should be dealt with at trial on a full evidentiary record, are binding precedents in the circumstances, and dictate that Apotex' motion to strike the impugned paragraphs of Merck's defence and counterclaim should be dismissed on that account.
[40] That said, I will go on to comment on the specific grounds raised pursuant to Rule 221(1)(a)(b) and (c), in particular the argument that the defence and counterclaim disclose no cause of action.
[41] Merck's is a novel defence, in an area of the law that is unsettled. Apotex has cited no jurisprudence that suggests that Merck's arguments have already been considered or determined by this Court. Apotex has also failed to cite any authority which dictates that Merck's proposed defence and counterclaim is prohibited beyond doubt, and as such, should be struck. That alone militates against finding no cause of action. There are other bases to conclude however, that it is not "plain and obvious" that the defence and counterclaim can not succeed or must inexorably fail.
[42] First, as to whether section 8 may be said to impose absolute liability, Merck points out that its plea in that regard is made in the alternative. I take it moreover that Merck pleads infringement with the belief that it is possible to defend against an action for delay.
[43] Following the hearing, Apotex requested permission to provide the Court with the decision in Merck Frosst Canada Inc. v. Canada (Minister of Health) (2001), 12 C.P.R. (4th) 447 (F.C.A.), in which Merck made arguments which Apotex alleges are entirely inconsistent with those made in these section 8 proceedings. According to Apotex, Merck, through its counsel in this same case, attempted to convince the Court to exercise its discretion to hear Merck's appeal (notwithstanding an argument that it was moot) so as to enable Merck to "avoid the automatic application of section 8(1) of the NOC Regulations."
[44] The passage from the judgment to that effect is of no assistance with respect to the issues to be decided on this motion to strike. It is not clear, and can not be asserted based on the passage, that Merck's position is that section 8 of the NOC Regulations provides for automatic, in the sense of absolute liability that does not allow for defences. The submissions regarding the automatic application of section 8(1) also do not preclude the possibility of a finding based on the evidence, that there was no loss suffered for which the first person would be liable.
[45] The term automatic may be used there to mean that section 8 is necessarily triggered or comes into play in the event of a failed prohibition, without more. Indeed, it is a term used by Merck, and attributed to Merck in the judgment. It is not a term defined or adopted by the Court, being precisely one of the issues for determination in the context of section 8 actions.
[46] Further, in this connection, subsection 8(5) makes clear that the Court may consider "the conduct" of the parties and "all matters that are relevant". I observed in Eli Lilly & Co. v. Apotex Inc., 2004 F.C. 206, _2004_ F.C.J. No 250 at para. 35, that Eli Lilly was not precluded from raising defences to a claim for damages in a section 8 case. I read the comments of Justice Rothstein in Syntex (U.A.A.) L.L.C. v. Canada (Minister of Health), (2002), 20 C.P.R. (4th) 29, to be to the same effect.
[47] I grant that in both cases the basis of a possible defence was a defective NOA. That said, neither these cases nor the jurisprudence cited by Apotex, foreclose consideration of the second person's infringement as "conduct", or a "relevant matter", which the Court may take into consideration in assessing damages.
[48] Finally, there is no reason to conclude that Apotex, in a section 8 action, will not have to establish or prove the loss that it has suffered, and which entitles it to recover damages. The defence and counterclaim, are to the effect that Apotex has not suffered any damages which should be recoverable in law pursuant to section 8 of the NOC Regulations since the only way that Apotex would have been able to sell Apo-Lovastatin between April 26, 1996 and the date the NOC was actually issued, was by infringing Merck's 380 Patent. Merck's suggestion has merit that any consideration of the loss Apotex is entitled to recover must assess that Apotex is entitled to lawfully recover the loss.
[49] This brings me to whether the defence is one of "theoretical infringement" and therefore unknown at law. Apotex points out, there were no infringing activities during the eleven months at issue, because Apotex did not have an NOC and was not marketing its product. Merck's allegations are therefore said to be theoretical in that they assert what would have been the case had an NOC issued earlier.
[50] In my view, the allegations of infringement, the absence of a non-infringing process or product in the period prior to the issuance of the NOC are not hypothetical, and may be proven through evidence adduced at trial.
[51] Finally, I turn to the plaintiff's argument that in the context of the host of proceedings involving Merck and Apotex, monies that are ordered to pay to each other by way of remedy will figuratively cross.
[52] Despite the connotations of Apotex' term "crossing the street", in no real sense can it be said that money will be crossing the street. The remedies in the two proceedings are not mutual debts. Money paid to Apotex in this section 8 proceeding is not recoverable by Merck upon a finding of infringement by Apotex, if any, in the patent infringement action. There will be no trading of money in that sense.
[53] If Merck is successful in establishing that Apotex did not have a non-infringing process for the manufacture of lovastatin, and that it is entitled to rely upon this as a defence to a section 8 claim, the only proper forum for the determination of this issue is in the section 8 proceeding. There is no venue, other than this, for Merck to litigate the issue of Apotex not having a non-infringing process prior to May, 1997.
Delay and Abuse of Process - Rule 221(1)(d) and (f)
[54] Apotex' principal contention is that the allegations of patent infringement in the within proceeding are identical to those in the patent infringement action. The prosecution of two identical proceedings is alleged by Apotex to be an abuse of process that will lead to inconsistent findings, duplication of effort, and excessive costs. It will also, says Apotex, cause extraordinary delay in the prosecution of the section 8 proceeding, and should be struck on that account.
[55] Apotex finds scant comfort in further submissions made by Merck as to how the proceedings might be managed as a practical matter to avoid duplication and unnecessary delay. Apotex finds none of Merck's suggestions to consolidate or simplify issues workable, let alone attractive. It maintains its position throughout that the section 8 action can not be rationalized with the infringement proceeding in a manner that is not prejudicial to Apotex.
[56] Let me deal first with Apotex' request that the defence and counterclaim be struck pursuant to Rule 221(d), as unduly delaying the trial of the section 8 action.
[57] Given that the defence of infringement is sound or tenable, it is difficult to accept that the pleading will delay the prosecution of this action. While section 6 proceedings, under the NOC Regulations are summary in nature, section 8 calls for an action. That action presumably can only be as expeditious as the full prosecution of the claim and defence and counterclaim will allow.
[58] As to the standard to be applied in striking pursuant to Rule 221(d), it was raised and debated by the parties. While I was not directed to jurisprudence directly on point, I am of the view that the applicable principles may be drawn from cases where amendments are considered as unduly delaying the prosecution of an action. Prejudice being the principal factor for consideration, a claim that is otherwise well founded will only be defeated if the party raising delay can demonstrate prejudice that is not compensable by an award of costs. (Merck & Co., Inc. v. Nu-Pharm Inc. (T.D.) [2002] 1 F.C. 105 at 129)
[59] Indeed, even if one were to admit some delay, due to efforts that may have to be made to consolidate aspects of this claim with the patent infringement action, this is not an instance where I would exercise my discretion to strike, given that the substantive rights of Merck are at issue which the delay is not sufficient or appropriate to defeat.
[60] As to whether the duplication of proceedings warrants the dismissal of Merck's allegations of patent infringement as constituting an abuse of process, I agree with the observations of Prothonotary Hargrave in British Columbia Native Women's Society v. R., 2001 FCT 646, _2001_ 4 F.C. 191, 2001 CarswellNat 1244 at paragraph 17, where he commented on multiple proceedings as follows:
"... This does not mean that multiple actions are, in themselves, abusive, but when actions either duplicate one another, or where all recovery of relief might be obtained in one action, the superfluous action or actions ought to be either stayed or struck out, depending upon the circumstances."
[61] I have considered the circumstances. The factors that I weigh in consideration are as follows. Merck has not commenced two actions of its own claiming the same relief. The parties to this proceeding are not identical to the parties in the patent infringement action, and different remedies are being pursued, at least in part. Finally, a matter for further discussion below, the two actions relate to distinct periods of time.
[62] There are procedural safeguards that are quite workable including consolidation, partially of discoveries, or otherwise, that will allow for the efficient management of the two actions which are case managed by the same case management judges. This will test the avowed determination of the parties to proceed expeditiously by hopefully adopting a collaborative approach, which is all to the good. There are also other procedural means to preclude inconsistent findings. They are not at issue here, and indeed are premature to contemplate at this time.
[63] While the factors I have considered militate against finding a prohibited duplication of proceedings, Merck's written submissions to the Court as well as at the hearing of the motion appear to be inconsistent with the scope and nature of the defendant's pleadings. It is in that apparent inconsistency, that I find an abuse of the Court's process.
[64] At the hearing of the motion, Merck insisted that it is not interested in having two full blown patent actions, and says it is not seeking a declaration of infringement "for all time" in it's counterclaim. Rather, it contends that the allegations of infringement are restricted to that period that is relevant to Apotex' claim for damages, eleven months.
[65] In addition, the following assertions are from Merck's written submissions:
"44. Unlike the Infringement Action, Merck's Defence and Counterclaim regarding infringement in this action pertains only to the eleven month period for which Apotex claims section 8 damages, namely, April 1996 to March 1997.
[...]
111. The allegations in the Infringement Action are also distinct from the allegation in the Defence and Counterclaim. In the Infringement Action Merck claims that Apotex and AFI infringed the '380 patent at a minimum after the issuance of its NOC for Apo-Lovastatin in March 1997, up to the time of the expiry of the '380 patent in January 2001. In the Section 8 action, however, Merck claims that Apotex did not have available to it a non-infringing process for the manufacture of lovastatin for the limited time period only of April 1996 to March 26, 1997."
[66] The pleadings do not bear out Merck's assertions. The claim for damages is limited to a claim for damages by way of set-off for a limited period. The declaration of patent infringement however, is not limited in time, and relates to a broad unbounded pleadings in defence, it being principally alleged, that Apotex never used a non-infringing process prior to the expiration of the 380 patent that expired in 2001.
[67] While Merck's representations may be taken to be akin to particulars, it will not do to have a pleading that on its face does not allow Apotex to know the case it has to meet, and essentially leaves the task of defining the scope of the allegations and counterclaim to the case management judge, undercutting the ability of the Court to efficiently manage these proceedings and its own process.
CONCLUSION
[68] To the extent that they are inconsistent with Merck's representations, I find that the open-ended pleadings, if not formally particularized, amount to an abuse of process. Especially so, in the context of actions that may require some form of consolidation. I will accordingly direct that Merck particularize its pleadings, by way of amendment, in a manner that is consistent with its representations to the Court. The particulars are to stipulate the period of alleged infringement that underlies the declaration of infringement that is sought.
[69] While I conclude, in favour of Apotex in this limited respect, an order will go otherwise dismissing the motion for the reasons given.
"Roza Aronovitch"
Prothonotary
APPENDIX I TO REASONS FOR ORDER DATED AUGUST 17,2004
DOCKET NO.T-1169-01
Section 8 of the Patented Medicines (Notice of Compliance) Regulations, SOR/93-133
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8. (1) If an application made under subsection 6(1) is withdrawn or discontinued by the first person or is dismissed by the court hearing the application or if an order preventing the Minister from issuing a notice of compliance, made pursuant to that subsection, is reversed on appeal, the first person is liable to the second person for any loss suffered during the period
(a) beginning on the date, as certified by the Minister, on which a notice of compliance would have been issued in the absence of these Regulations, unless the court is satisfied on the evidence that another date is more appropriate; and
(b) ending on the date of the withdrawal, the discontinuance, the dismissal or the reversal.
(2) A second person may, by action against a first person, apply to the court for an order requiring the first person to compensate the second person for the loss referred to in subsection (1).
(3) The court may make an order under this section without regard to whether the first person has commenced an action for the infringement of a patent that is the subject matter of the application.
(4) The court may make such order for relief by way of damages or profits as the circumstances require in respect of any loss referred to in subsection (1).
(5) In assessing the amount of compensation the court shall take into account all matters that it considers relevant to the assessment of the amount, including any conduct of the first or second person which contributed to delay the disposition of the application under subsection 6(1).
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8. (1) Si la demande présentée aux termes du paragraphe 6(1) est retirée ou fait l'objet d'un désistement par la première personne ou est rejetée par le tribunal qui en est saisi, ou si l'ordonnance interdisant au ministre de délivrer un avis de conformité, rendue aux termes de ce paragraphe, est annulée lors d'un appel, la première personne est responsable envers la seconde personne de toute perte subie au cours de la période :
a) débutant à la date, attestée par le ministre, à laquelle un avis de conformité aurait été délivré en l'absence du présent règlement, sauf si le tribunal estime d'après la preuve qu'une autre date est plus appropriée;
b) se terminant à la date du retrait, du désistement ou du rejet de la demande ou de l'annulation de l'ordonnance.
(2) La seconde personne peut, par voie d'action contre la première personne, demander au tribunal de rendre une ordonnance enjoignant à cette dernière de lui verser une indemnité pour la perte visée au paragraphe (1).
(3) Le tribunal peut rendre une ordonnance aux termes du présent article sans tenir compte du fait que la première personne a institué ou non une action pour contrefaçon du brevet visé par la demande.
(4) Le tribunal peut rendre l'ordonnance qu'il juge indiquée pour accorder réparation par recouvrement de dommages-intérêts ou de profits à l'égard de la perte visée au paragraphe (1).
(5) Pour déterminer le montant de l'indemnité à accorder, le tribunal tient compte des facteurs qu'il juge pertinents à cette fin, y compris, le cas échéant, la conduite de la première personne ou de la seconde personne qui a contribué à retarder le règlement de la demande visée au paragraphe 6(1).
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FEDERAL COURT
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-1169-01
STYLE OF CAUSE: APOTEX INC. v. MERCK & CO., INC. ET AL.
PLACE OF HEARING: TORONTO
DATE OF HEARING: APRIL 16, 2004
REASONS FOR ORDER : MADAM PROTHONOTARY ARONOVITCH
DATED: OCTOBER 20, 2004
APPEARANCES:
ANDREW BRODKIN FOR THE PLAINTIFF
NATHALIE BUTTERFIELD
WILLIAM RICHARDSON FOR THE DEFENDANTS
GLYNNIS BURT
TAMARA RAMSEY
SOLICITORS OF RECORD:
GOODMANS LLP FOR THE PLAINTIFF
TORONTO, ON
McCARTHY TÉTRAULT LLP FOR THE DEFENDANTS
TORONTO, ON
MORRIS ROSENBERG FOR THE DEFENDANT BY
DEPUTY ATTORNEY GENERAL COUNTERCLAIM
OF CANADA
Under the current Regulations, the statutory stay period has been reduced to 24 months after the commencement of the prohibition proceedings.
For ease of reference, I have attached the pertinent subsections of section 8 of the NOC Regulations as an appendix to these reasons.
Paragraph 41(c) of Merck's statement of defence and counterclaim states that section 8 of the Regulations "imposes an absolute liability and is penal and confiscatory in nature, in that it purports to impose a liability for damages without any requirement for proof of fault or breach of duty or infringement of any right known to the law on the part of the defendant and subsection is no severable from the balance of section 8."
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