Date: 20001027
Docket: T-270-99
BETWEEN :
ELI LILLY AND COMPANY and
ELI LILLY CANADA INC.
Applicants
- and -
PRO DOC LIMITÉE
and THE MINISTER OF NATIONAL HEALTH AND WELFARE
Respondents
REASONS FOR ORDER
DUBÉ J. :
[1] This application by Eli Lilly and Company and Eli Lilly Canada Inc. ("Eli Lilly") is for an Order pursuant to subsection 6(1) of the Patented Medicines (Notice of Compliance) Regulations1 ("the Regulations"), prohibiting the Minister of National Health and Welfare ("Health Canada") from issuing a Notice of Compliance ("NOC") under section C.08.004 of the Food and Drug Regulations2 to Pro Doc Limitée ("Pro Doc") in connection with Pro Doc's Abbreviated New Drug Submission for nizatidine capsules in 150 mg and 300 mg strengths for oral administration until after the expiration of Canadian Letters Patent 1,166,248 ("the 248 Patent") owned by Eli Lilly.
1. Facts
[2] On October 21, 1991, the Commissioner of Patents issued Compulsory Licence No. J2324-39(4)-988 to Novopharm Limited ("Novopharm") relating to the 248 Patent allowing it to make nizatidine for the preparation or production of medicine and to import and/or sell medicine made by the process. Paragraph 12 of the Compulsory Licence stipulates that the licence is non-transferable and that Novopharm is prohibited from granting "any sublicence". On November 27, 1992, Novopharm and Apotex Inc. ("Apotex") entered into an agreement ("the Supply Agreement") in anticipation of proposed changes to the Patent Act3 ("the Act"). Paragraph 9 of the Supply Agreement reads as follows:
| 9. The unlicensed party shall resell any product purchased from the licensed party only under its own label and shall not sell the product for resale under a label other than that of the unlicensed party. |
[3] The purpose of the Supply Agreement was to ensure that the parties have available for use licences on the maximum number of products for their mutual benefit in relation to other competitors.
[4] By letter dated February 15, 1999, Pro Doc provided a Notice of Allegation ("NOA") to Eli Lilly with respect to 150 mg and 300 mg capsules of nizatidine. The NOA referred to the Compulsory Licence for nizatidine held by Novopharm and also to the Supply Agreement. Pro Doc also undertook that until the expiry of the 248 Patent "all nizatidine capsules that we will sell will be made for us by Apotex using only licensed nizatidine purchased by Apotex from Novopharm". It is common ground that the nizatidine product to be sold by Apotex to Pro Doc will be sold under the Pro Doc product label rather than the Apotex label contrary to paragraph 9 of the Supply Agreement.
2. Issue
[5] The central issue is whether Eli Lilly has established, on a balance of probabilities, that the allegation of Pro Doc in its NOA is not justified within the meaning of subsection 6(2) of the Regulations.
3. The Applicants' Submissions
[6] This proceeding is brought under subsection 55.2(4) of the Act and Regulations which set out a mechanism whereby the issuance of a NOC is prohibited in circumstances that might directly or indirectly result in the infringement of a patent.
[7] The sole basis for the allegation of non-infringement on the part of Pro Doc is that the nizatidine capsules that it will sell will be made by Apotex using bulk nizatidine manufactured by Novopharm pursuant to the Compulsory Licence granted to Novopharm. However, the Supply Agreement between Novopharm and Apotex imposes a condition which provides that the product purchased from the licensed party will be sold under the Apotex label. Pro Doc will break this condition as it intends to sell the product under its own label. By breaking a condition of the Supply Agreement, Pro Doc is no longer authorized to sell the product and would therefore infringe Eli Lilly's patent. Consequently, the NOC ought not to be granted to Pro Doc.
4. The Respondent Pro Doc's Submissions
[8] In its NOA, Pro Doc alleged that it would not infringe the 248 Patent because all nizatidine capsules to be sold by Pro Doc will be made using only licensed nizatidine. The legal and factual basis for Pro Doc's allegation was that all nizatidine capsules that Pro Doc intended to sell would be made by Apotex using only licensed nizatidine which Apotex would acquire from Novopharm and which Novopharm would sell pursuant to the terms of its Compulsory Licence.
[9] The supply contemplated by the Supply Agreement is the bulk, active medicinal ingredient in respect of which the supplying party holds a Compulsory Licence. The licensed bulk is then utilized by the acquiring party for the manufacture of finished dosage form. In the case of nizatidine, Novopharm sells licensed nizatidine in bulk to Apotex which then utilizes the licensed bulk nizatidine for the manufacture of finished dosage form products, in this case, capsules.
[10] As a purchaser of licensed nizatidine, Apotex is permitted, free of infringement of the 248 Patent, either to resell the licensed bulk nizatidine or to manufacture finished dosage forms containing the licensed bulk nizatidine and to resell same. This right was confirmed by the Supreme Court of Canada in Eli Lilly and Co. v. Novopharm Ltd.4 in connection with Apotex's own allegation of non-infringement by reason of the acquisition of licensed nizatidine from Novopharm.
[11] As such, in light of the decision of the Supreme Court of Canada, the capsules will be licensed capsules in the hands of Pro Doc, thereby permitting it to use and sell the capsules free of infringement of the 248 Patent. Approval or authority of the licensee (Novopharm) is not necessary once the licensed material has been resold by the licensee.
[12] Whether or not Pro Doc abides by the conditions under the Supply Agreement is not relevant because the Supply Agreement is not a sublicence, it is merely a contractual agreement and Eli Lilly is not a party to it. Only a breach of a condition of the licence or sublicence can result in infringement of the patent.
[13] The Supply Agreement in question was examined by the Supreme Court of Canada and it determined that it did not constitute a sublicence. Iacobucci J. said as follows in Eli Lilly and Co. v. Novopharm Ltd.5 at pages 173-4:
| Where the rights of the unlicensed party are derived from a sale of licensed material, however, it would be misleading to rely on the rights of use and alienation as a basis for the conclusion that a sublicence has been or is to be granted. ... Under the agreement, any right Apotex might enjoy to sell nizatidine would obviously emanate from its first having purchased such material from Novopharm. |
[14] As the Supply Agreement is purely a contractual document between Novopharm and Apotex, a breach of it is totally irrelevant.
5. Analysis
[15] I fully agree with the submissions of the respondent. The obligations under an agreement bind only the contracting parties. Once licensed material is sold, the patentee's rights are terminated with the sale. A breach of paragraph 9 of the Supply Agreement between Novopharm and Apotex does not confer any right upon Eli Lilly, the patentee or the licensee. The Compulsory Licence issued to Novopharm included no such condition that an unlicensed party purchasing from Novopharm would not sell the product under a label other than its own. The sale of any bulk product conveys the right to manufacture capsules as, obviously, the bulk product by itself is of no use or commercial value unless and until it is processed into capsules that can be sold to the public.
[16] Hence, the breach in question here is not the breach of a patent or a licence or a sublicence, but merely the breach of a contractual agreement which breach may create a right of action between the two contracting parties but not between a contracting party and a stranger to the agreement.
[17] The burden of proof in a prohibition application under subsection 6(1) of the Regulations is a heavy one. The patentee who objects to the issuance of a NOC must show that none of the allegations advanced by the applicant is justified. Joyal J. formerly of this Court said as follows in Pfizer Canada Inc. v. Nu-Pharm Inc.6 at page 3:
| It is well established that in order to grant a prohibition order, the Court must find that the patentee has established, on a balance of probabilities, that the second person's allegations are not justified. In determining the nature of the burden to be met by the applicants, it is important to remember that the proceeding under subsection 6(2) is not an ordinary infringement action. Rather, it is a summary proceeding intended to allow a patent owner to protect its patent rights where the generic's allegations of non-infringement or invalidity have no merit. Accordingly, if a patent owner cannot establish that the generic's allegations have no merit, the prohibition application should be dismissed and the issue left to be resolved by more conventional measures7. |
[18] In this instance, the sole basis for the allegation of non-infringement by Pro Doc is that the bulk product was made by Apotex which obtained it from Novopharm who is authorized to sell it under a Compulsory Licence. The instant proceeding is a summary one which allows a patentee, served with a NOA, to prevent Health Canada from issuing a NOC to a generic producer who would infringe his patent. It is not a patent infringement action but a preventive proceeding.
[19] In the case at bar, there may be a breach of a contractual condition of a Supply Agreement between Novopharm and Apotex but that does not establish that Pro Doc's allegation of non-infringement is not justified.
[20] Consequently, Eli Lilly's application is dismissed with costs.
OTTAWA, Ontario
October 27, 2000
Judge
__________________
1 SOR/93-133.
2 C.R.C., c. 870.
3 R.S.C. 1985, c. P-4, as amended.
4 [1998] 2 S.C.R. 129.
5 supra, note no. 4.
6 (1998), 83 C.P.R. (3d) 1 (F.C.T.D.).
7 ibid; see also: Merck Frosst Canada Inc. v. Canada (Minister of National Health and Welfare) (1994), 55 C.P.R. (3d) 302 (F.C.A.); Hoffman-La Roche Ltd. v. Canada (Minister of National Health and Welfare) (1996), 70 C.P.R. (3d) 206 (F.C.A.) and Abbott Laboratories, Ltd. v. Nu-Pharm Inc. (1998), 83 C.P.R. (3d) 441 (F.C.A.).
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