Date: 20101217
Docket: T-2078-00
Citation: 2010 FC 1304
Ottawa, Ontario, December 17, 2010
PRESENT: The Honourable Madam Justice Tremblay-Lamer
BETWEEN:
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BRISTOL-MYERS SQUIBB COMPANY and
BRISTOL-MYERS SQUIBB CANADA CO.
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Applicants
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and
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APOTEX INC.
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Defendant
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REASONS FOR ORDER AND
ORDER
[1]
This is an appeal, pursuant to Rule 51 of
the Federal Courts Rules, SOR/98-106 whereby Apotex Inc. (“Apotex”)
seeks to set aside an order of Prothonotary Aronovitch dated October 26, 2010,
wherein Apotex was denied leave to serve and file an amended Statement of
Defence and Counterclaim. Bristol-Myers Squibb Company and Bristol-Myers
Squibb Canada Inc. (collectively, “BMS”), the plaintiffs in the main action,
oppose Apotex’s proposed amendment because they allege it introduces two new
defences, lack of utility and lack of sound prediction, on the eve of trial.
Apotex, for its part, argues that its pleadings have always included allegations
as to lack of utility and lack of sound prediction, and that the proposed
amendment is merely a clarification.
BACKGROUND
[2]
On November 10, 2000, BMS
commenced an action against Apotex for infringement of Canadian Letters Patent
No. 1,198,436 (the “’436 Patent”), alleging that Apotex had made, used, sold
and offered for sale nefazodone hydrochloride in finished dosage form in
violation of BMS’ rights under the ‘436 Patent. Specifically, BMS alleged
Apotex had infringed claims 1, 2, 3, 4, 7 and 8 of the ‘436 Patent. Claims 1
and 2 cover a broad range of compounds which include nefazodone and nefazodone
hydrochloride. Claims 3, 4, 7 and 8 are more specific to nefazodone and its
salts.
[3]
On
February 6, 2001, Apotex filed a Statement of Defence and Counterclaim (SOD)
whereby it denied the allegations of infringement and asserted that the ‘436
Patent was invalid, void and of no force or effect. For the purposes of the
current appeal, of particular interest are the following two grounds of
invalidity alleged by Apotex at paragraphs 20 and 21 of its SOD:
20. The ‘436 Patent and the claims thereof are invalid on
the basis that they fail to disclose an invention within the meaning of section
2 of the Patent Act. More particularly, the compounds which are
described within the claims of the ‘436 Patent lack the utility promised by the
specification of the ‘436 Patent. The claims of the ‘436 Patent include
compounds within their scope that do not function as anti-depressants and are
inoperable as medicines.
21. In addition, at the time of the petition for the ‘436
Patent and at all material times thereafter, the persons listed as the
inventors of the ‘436 Patent did not have any sound basis for predicting that
all of the compounds within the class of compounds described by Formula I and
included in the claims of the ‘436 Patent would have the utility promised by
the specification of the ‘436 Patent.
[4]
BMS sought
clarification with respect to paragraph 20. On February 15, 2001, it sent
Apotex a demand for particulars requesting that Apotex indicate the specific
compounds it was alleging “in paragraph 20 [did] not function as
antidepressants and [were] inoperable as medicines.” Apotex replied on February
22, 2001 by indicating that the compounds that it was alleging did “not
function as antidepressants” and were “inoperable as medicines” were,
essentially, all compounds within the ‘436 Patent other than nefazodone
and its salts. In September of 2001, a similar exchange took place during
examination for discovery of Apotex (between counsel for BMS, Mr. Creber, and
counsel for Apotex, Mr. Radomski):
Question 304:
Mr. Creber: So this allegation is that
every compound within claim 1 but for nefazodone and its salts doesn’t work?
Mr. Radomski: That would be the logical
conclusion.
Mr. Creber: And that is your plea?
Mr. Radomski: Yes.
[5]
Furthermore,
during discovery in February of 2002, Mr. Radomski indicated that the
allegations regarding lack of sound prediction found at paragraph 21 of the
Apotex SOD did not apply to nefazodone. He indicated:
The issue is not sound prediction as to Nefazodone because
we know it was made, and we know that it was clinically tested, and we know
that it appears to be a successful and workable product; but the question has
to do with the other compounds.
[6]
As a
result of this, Mr. Creber suggested to Mr. Radomski that since the issue of
lack of sound prediction was related to compounds other than nefazodone and
nefazodone hydrochloride, and since Apotex was not making any of those other
compounds, nor did they intend to make any of those other compounds, then there
might be a way to “simplify things” so as to focus on the “real issue”. Mr.
Creber and Mr. Radomski then agreed to focus the action on claims 3, 4, 7, and
8 of the ‘436 Patent (the claims more narrowly confined to nefazodone and its
salts) and drop claims 1 and 2 (the broader claims) from the action.
[7]
In July of
2004, Apotex amended its SOD in two ways that are relevant to this appeal. First,
it introduced two new paragraphs after paragraph 20 which read as follows:
20A. The ‘436 Patent asserts that the present invention
relates to compounds, including nefazodone, and, inter alia, their
“therapeutic use in treating depression”. The ‘436 Patent promises that the
compounds of the invention, including nefazodone, are “improved antidepressants
with minimal side effect potential”. The ‘436 Patent also asserts that the
invention provides a method for treating a mammal afflicted with depression and
that, in accordance with good clinical practice, the invented compounds,
including nefazodone, can be administered to produce effective antidepressant
effects without causing any harmful or untoward side effects.
20B. Contrary to the assertions of the ‘436 Patent, as
aforesaid, the compounds of the ‘436 Patent, including nefazodone, do not meet
the promise of the ‘436 Patent in that the compounds, including nefazodone, are
not “improved antidepressants with minimal side effect potential”. Thus, the compounds
of the ‘436 Patent do not have the utility promised in the ‘436 Patent.
[8]
The second
relevant amendment was the following addition to paragraph 21:
21. In addition, even if one or more of the compounds
of the ‘436 Patent have the utility promised by the ‘436 Patent, which is not
admitted, but denied, at the time of the petition for the ‘436 Patent and
at all material times thereafter, the persons listed as the inventors of the
‘436 Patent did not have any sound basis for predicting that all of the
compounds within the class of compounds described by Formula I and included in
the claims of the ‘436 Patent would have the utility promised by the
specification of the ‘436 Patent.
[9]
BMS did
not oppose the Apotex amendment. Discovery was focussed on the narrow issue of
lack of utility pertaining to a specific liver toxicity side effect that had
been discovered to be associated with nefazodone use (which had ultimately led
to the withdrawal of nefazodone products from the market in 2003).
[10]
In April
of 2007, Apotex delivered its answers to questions BMS had posed on continued
examinations for discovery. Two of the questions and answers are particularly
relevant to this appeal [emphasis added]:
Q 973: To advise if the only allegation
in respect of inutility with respect to nefazodone was in respect of liver
toxicity effects and not with respect to any of the other statements made in
Apotex’s product monograph.
A: Liver toxicity effects is not the
only allegation in respect of inutility with respect to nefazodone that Apotex
is pleading.
Q 975: To provide any other basis for
inutility that we are going to plead other than liver toxicity.
A: The other bases for inutility
that Apotex is going to plead other than liver toxicity include that, contrary
to the assertions of the ‘436 Patent, nefazodone does not produce “effective
antidepressant effects without causing any harmful or untoward side effects”
and is not an “improved antidepressant with minimal side effect potential”
as promised.
[11]
In August
of 2009, Apotex served its expert reports on invalidity. The reports included
opinion evidence to the effect that nefazodone lacked the utility promised by
the ‘436 Patent because it was not an “improved antidepressant with minimal
side effect potential” and to the effect that there was no basis, at the filing
date, to soundly predict that nefazodone would be an improved antidepressant
with minimal side effect potential.
[12]
On
November 2, 2009, BMS wrote to Apotex indicating that the Apotex expert reports
went beyond the scope of the live issues in that they contained analysis
regarding utility and sound prediction which, aside from the liver toxicity
aspect, were no longer at issue between the parties. BMS further stated:
As you are aware, we have limited our claims to claims 3, 4,
7 and 8 and, as such, the only issue in this case is the compound nefazodone.
Therefore, it would appear that your pleas in Paragraphs 20 and 21 are and have
been moot for some time considering that nefazodone was never alleged to lack
utility or was not a sound prediction.
[13]
On
November 30, 2009, Apotex replied to BMS and indicated that the issues of lack
of utility and lack of sound prediction in relation to nefazodone were pleaded
and were being pursued in respect of more than just claims 1 and 2 of the
patent. BMS protested the inclusion of the issues of inutility and lack of
sound prediction in the Apotex reports, but the case management judge directed
that the admissibility of that aspect of the reports would be best left to be determined
by the trial judge. As such, in January of 2010, BMS served expert reports
addressing the issues of inutility and lack of sound prediction as raised by
Apotex.
[14]
In March
of 2010, BMS amended its Statement of Claim (SOC) to officially withdraw allegations
of infringement regarding claims 1 and 2 of the ‘436 Patent, as had been agreed
upon during discovery in 2002. On April 26, 2010, Apotex filed an amended SOD
in response. The principal amendments made, and the key amendments that are at
issue in this appeal, were found at paragraph 20 and 21 of the SOD. The
paragraphs were amended to read as follows:
20. The ‘436 Patent and the claims thereof, including
specifically the Asserted Claims, are invalid on the basis that they fail
to disclose an invention within the meaning of section 2 of the Patent Act.
More particularly, the compounds which are described within the claims of the
‘436 Patent lack the utility promised by the specification of the ‘436 Patent.
The claims of the ‘436 Patent include compounds within their scope that do not
function as anti-depressants and are inoperable as medicines.
21. In addition, even if one or more of the compounds of
the ‘436 Patent have the utility promised by the ‘436 Patent, which is not
admitted, but denied, at the time of the petition for the ‘436 Patent and at
all material times thereafter, the persons listed as the inventors of the ‘436
Patent did not have any sound basis for predicting that all or any of
the compounds within the class of compounds described by Formula I and included
in the claims of the ‘436 Patent, including specifically the compounds of
the Asserted Claims, would have the utility promised by the specification
of the ‘436 Patent.
Note that “Asserted Claims” was defined in the amendment as
“claims 3, 4, 7, and 8 of the ‘436 Patent.”
[15]
BMS moved
to strike the amendments, claiming that they did not flow from the amended SOC
and that, in fact, they introduced new allegations regarding lack of utility
and lack of sound prediction in relation to nefazodone that were not already in
the case. On July 30, 2010, Prothonotary Aronovitch allowed the motion, and
struck the amendments to paragraph 20 and 21 of the Apotex SOD. She indicated
that the changes constituted a “material and radical departure from previous
pleadings contrary to the admissions made by way of particulars, and repeatedly
and clearly reaffirmed on discovery.” Prothonotary Aronovitch indicated that a
formal motion to amend, supported by evidence to justify departure from the
material facts pleaded, would be necessary to introduce the new allegations of
lack of utility and lack of sound prediction. Prothonotary Aronovitch’s
decision was upheld on appeal.
[16]
On
September 30, 2010, Apotex filed a motion requesting leave to serve and file a
Sixth Amended Statement of Defence and Counterclaim to introduce the same
changes to paragraph 20 and 21 it originally had attempted to introduce in
response to BMS’ amended SOC in April of 2010. On October 26, 2010,
Prothonotary Aronovitch declined to grant leave. It is that order that Apotex
seeks to have set aside.
ANALYSIS
[17]
The
appropriate standard of review to be applied to a discretionary decision made
by a prothonotary is the standard set out in Merck & Co v. Apotex, 2003 FCA 488, [2004] 2 F.C.R. 459 at
para. 19 [Merck]. There, the Federal Court of Appeal indicated that a
discretionary order of a prothonotary is not to be disturbed on appeal unless:
a) the questions raised in the motion are vital to the final issue of the case,
in which case the matter is considered de novo, or b) the order is
clearly wrong, in the sense that the exercise of discretion by the prothonotary
was based on a wrong principle or a misapprehension of the facts, in which
case, again, the matter is considered de novo.
[18]
The
questions raised in this motion are vital to the final issue of the case. The
outcome effectively determines whether or not Apotex is able to advance lack of
utility (with the exception of the narrow issue of liver toxicity which both
parties agree is in the case) and lack of sound prediction with respect to
nefazodone and nefazodone hydrochloride.
[19]
At the
hearing, counsel for BMS did not deny that the questions raised on this motion
were vital to the final issue of the case. Instead, he simply indicated that
because Prothonotary Aronovitch had case-managed this particular action for a
number of years, the Court should show deference to her findings. While I agree
that it is important to show deference to the decisions of a case management
judge, the current motion raises questions that are vital to the final issue of
the case, and, as such, I must consider the matter de novo.
[20]
The
general rule with respect to whether or not a party should be permitted to
amend its pleadings was set out by the Federal Court of Appeal in Canderel
Ltd. v. Canada (1993), [1994] 1 F.C. 3, 157 N.R. 380 (C.A.) [Canderel].
An amendment should be allowed for the purpose of determining the real
questions in controversy, provided that: a) allowing the amendment would not
result in an injustice to the other party that is not capable of being
compensated by an award of costs, and b) allowing the amendment would serve the
interests of justice. Furthermore, the Federal Court of Appeal in Merck,
above at para. 32, indicated:
There is a burden to be met by
the amending party and, while the factors to be considered are essentially the
same for all amendments, the burden should be heavier when the amendments at
issue purport to withdraw substantial admissions and would result in a radical
change in the nature of the questions in controversy.
[21]
On the
current motion, then, two main questions arise. First, do the amendments at
issue result in a “radical change” thus increasing the burden for Apotex to
justify its proposed amendments; and second, will allowing the amendments
result in an injustice to BMS that is not capable of being compensated by an
award of costs?
[22]
In
considering the nature of the proposed change, I will address the amendments to
paragraph 20 and 21 separately. BMS argues that the amendment to paragraph 20
of the Apotex SOD effectively introduces the issue of inutility with respect to
nefazodone and nefazodone hydrochloride for the first time. Despite the broad
wording of the original paragraph 20, BMS argues that the particulars provided
by Apotex in February of 2001 and the admissions provided by Mr. Radomski
during discovery in September of 2001 limited the scope of paragraph 20 so that
it only applied to the compounds in claim 1 and 2 of the ‘436 Patent other
than nefazodone and nefazodone hydrochloride. It argues that, aside from
the narrow issue of liver toxicity introduced at paragraphs 20A and 20B in
2004, any allegations as to lack of utility had been out of the case altogether
since the parties agreed to focus the action on claims 3, 4, 7 and 8 in
February of 2002.
[23]
On the
other hand, Mr. Radomski has submitted affidavit evidence to the effect that
paragraph 20 was always intended by Apotex to allege lack of utility against
nefazodone and nefazodone hydrochloride. He claims that this position is not
contradicted by the particulars and admissions made in 2001, because there have
always been two aspects to the lack of utility pleaded in paragraph 20.
The first aspect, he argues, is captured by the sentence, “More particularly,
the compounds which are described within the claims of the ‘436 Patent lack the
utility promised by the specification of the ‘436 Patent.” This, he suggests,
clearly applies to all the compounds described in the ‘436 Patent –
which would include nefazodone and nefazodone hydrochloride. The lack of
utility alleged here, Mr. Radomski submits, is with respect to the broad
promise of the patent which, in part, includes the delivery of an “improved
antidepressant with minimal side effect potential.”
[24]
The second
aspect of inutility is captured by the sentence, “The claims of the ‘436 Patent
include compounds within their scope that do not function as anti-depressants
and are inoperable as medicines.” This is the aspect of paragraph 20 that Mr.
Radomski claims his admissions during discovery in September of 2001 and the
particulars provided in February of 2001 were addressing.
[25]
It is true
that the BMS demand for particulars in 2001 only requested a list of the
compounds that did “not function as antidepressants” and were “inoperable as
medicines”. The particulars provided by Apotex in response were, thus, limited
to the second aspect of inutility alleged in paragraph 20. Similarly, the
admissions provided by Mr. Radomski during discovery in 2001 can also be read
as being restricted to the compounds that Apotex was attacking due to lack of
utility as antidepressants. Mr. Radomski argues, essentially, that
Apotex was never asked to specify which compounds that it was alleging lacked
utility in general, in terms of the broader promise of the ‘436 Patent – and,
thus, it never provided that detail. In any event, Mr. Radomski submits that
the wording of paragraph 20 is clear that Apotex was alleging that all
of the compounds described in the ‘436 Patent lacked the utility promised by
the broad specification of the ‘436 Patent in some way.
[26]
I can see
why, after the discovery of September 2001, BMS came away with the impression
that paragraph 20 was only alleging inutility with respect to the compounds of
claim 1 other than nefazodone and nefazodone hydrochloride. Furthermore,
I suspect that Apotex was aware of this misapprehension and purposefully, for
strategic reasons, decided not to clarify the matter for BMS. This type of
strategic manoeuvring is directly contrary to the purpose and spirit of
discovery and is looked upon very unfavourably by this Court. However, I find
that in this case, by way of subsequent conduct, Apotex did make the meaning of
paragraph 20 sufficiently clear such that it is difficult for BMS to now claim
a sound basis for being surprised by Apotex’s proposed amendments.
[27]
The
amendments made by Apotex in 2004 at paragraphs 20A and 20B clearly indicate
that Apotex intended to attack nefazodone for lack of utility based on grounds
other than nefazodone’s effectiveness as an anti-depressant or operability as a
medicine. Paragraph 20B indicated, “the compounds of the ‘436 Patent,
including nefazodone, do not meet the promise of the ‘436 Patent in that the
compounds, including nefazodone, are not ‘improved antidepressants with minimal
side effect potential’” [emphasis added]. At no point did Apotex indicate
that the new paragraphs were limited to the narrow issue of liver toxicity
which had been discovered in 2003. If any doubt remained, it was certainly
clarified on continued discovery in 2007 when Apotex set out specifically that,
“Liver toxicity effects is not the only allegation in respect of inutility with
respect to nefazodone that Apotex is pleading,” and that, “The other bases for
inutility that Apotex is going to plead other than liver toxicity include that,
contrary to the assertions of the ‘436 Patent, nefazodone does not produce
‘effective antidepressant effects without causing any harmful or untoward side
effects’ and is not an ‘improved antidepressant with minimal side effect
potential’ as promised.”
[28]
As such, I
find that the proposed amendments to paragraph 20 cannot be said to constitute
a radical departure from Apotex’s prior pleadings.
[29]
With
respect to paragraph 21, BMS points to Mr. Radomski’s statement during
discovery in February of 2002 as an admission that paragraph 21 did not apply
to nefazodone and its salts. During that discovery, Mr. Radomski indicated that
Apotex was not alleging lack of sound prediction with respect to nefazodone.
[30]
Apotex
argues, however, that Mr. Radomski’s statement was not so much an admission as
it was an agreement as to the current state of the law as it existed in
February of 2002. Mr. Radomski had indicated at that time that there was no
issue with respect to the sound prediction of nefazodone because
nefazodone had, subsequent to the filing of the ‘436 Patent, been made,
clinically tested, and was successful. Under the governing law of the time, as
established in Apotex Inc. v. Wellcome Foundation Ltd., [2001] 1 F.C.
495, 262 N.R. 137 (F.C.A.), that was enough – all that was required was for an
inventor to demonstrate utility or sound prediction at the time a patent was
attacked. Apotex points out, however, that the law changed subsequent to Mr. Radomski’s
statement. In December of 2002, the Supreme Court of Canada in Apotex Inc.
v. Wellcome Foundation Ltd., 2002 SCC 77, 219 D.L.R. (4th) 660 directed
that either actual utility or a sound basis for predicting utility was required
as of the filing date of a patent. As such, Apotex argues that the statement
made by Mr. Radomski in February of 2002 was obviously no longer applicable:
the fact that nefazodone had been shown to eventually have utility as an
anti-depressant no longer necessarily meant that the ‘436 Patent was
immune to attack based on lack of sound prediction as of the filing date.
[31]
While I
agree that it would have been preferable if Apotex had formally withdrawn its
statement in light of the change of law, I find that the amendments made by
Apotex to paragraph 21 in July of 2004 sufficiently demonstrated that lack of
sound prediction with respect to nefazodone and nefazodone hydrochloride was a
live issue. The amendment to paragraph 21 paralleled the change of law with
respect to sound prediction: it alleged that even if one of the compounds of
the ‘436 Patent had eventually been shown to have the utility promised, there
was a lack of sound prediction at the time of filing. As Apotex points out,
since nefazodone was the only compound covered by the ‘436 Patent which had
been demonstrated to have anti-depressant activity, it should have been clear
that this modification was specifically targeted at nefazodone. In fact, that
Apotex was amending paragraph 21 at all should have been an indication that the
issue of lack of sound prediction was not out of the case as BMS claims to have
thought it was. After all, why would a party take steps to add further detail
to a “moot” pleading?
[32]
I find
that given the change of law regarding lack of sound prediction, and given the
modifications made by Apotex to paragraph 21 subsequent to that change, it cannot
be said that the amendments sought by Apotex on the current motion constitute a
radical departure from Apotex’s prior pleadings.
[33]
Overall, I
would agree that the amendments proposed by Apotex essentially act to clarify
Apotex’s position with respect to paragraphs 20 and 21. That being said, it is
clear from the affidavit evidence that BMS was acting under the belief – at
least until Apotex filed its expert reports in 2009 – that lack of utility
(aside from with respect to liver toxicity) and lack of sound prediction were
no longer live issues. It is also clear that Apotex was not as forthcoming with
respect to paragraphs 20 and 21 as it could have been. Given this, it is still
worthwhile to consider whether allowing the proposed amendments would result in
injustice to BMS that is not capable of being compensated by an award of costs,
as per the test from Canderel, above.
[34]
The main
question that arises with respect to prejudice in the current matter is, given
that trial is set to begin in March of 2011, does BMS have sufficient time to
adequately address the allegations of inutility and lack of sound prediction
raised in paragraphs 20 and 21 of the Apotex SOD? Based on the evidence and
arguments submitted by the parties, I must conclude that the answer to this
question is yes. The expert reports provided by Apotex in August of 2009
particularized the claims of inutility and lack of sound prediction being advanced.
Although under protest, BMS has already filed expert reports addressing the
issues of inutility and lack of sound prediction as raised in the Apotex
reports. Furthermore, Apotex has undertaken to make itself available for any
additional discovery needed, and to provide particulars expeditiously as
required by BMS so that trial can proceed as scheduled. It should be noted that
the Court expects Apotex to carry out these undertakings in good faith, and to
ensure that there is no delay in bringing the action to trial in March.
Having said this, there is nothing to suggest that delay will result or that
BMS will have any particular difficulty pleading in response to the Apotex
allegations.
[35]
Given that
I do not find that the amendments proposed by Apotex constitute a significant
change to its pleadings, and given that I do not find that the amendments will
result in injustice to BMS that is not capable of being compensated by an award
of costs, and given the importance of ensuring that the substantive rights of
the parties remain intact, the order of Prothonotary Aronovitch is set aside
and Apotex is granted leave to serve and file the proposed Sixth Amended
Statement of Defence and Counterclaim.
ORDER
THIS COURT ORDERS that the order of Prothonotary
Aronovitch is set aside and Apotex is granted leave to serve and file the
proposed Sixth Amended Statement of Defence and Counterclaim. Costs are in the
cause.
“Danièle Tremblay-Lamer”
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