Date: 20100212
Docket: T-1161-07
Citation: 2010
FC 150
Toronto, Ontario, February 12, 2010
PRESENT: Madam Prothonotary Milczynski
BETWEEN:
SANOFI-AVENTIS CANADA INC.,
SCHERING CORPORATION and
SANOFI-AVENTIS DEUTSCHLAND GmbH
Plaintiffs
and
NOVOPHARM LIMITED
Defendant
AND
BETWEEN:
NOVOPHARM LIMITED
Plaintiff by Counterclaim
and
SANOFI-AVENTIS CANADA INC.,
SCHERING CORPORATION and
SANOFI-AVENTIS DEUTSCHLAND GmbH
Defendants by Counterclaim
REASONS FOR ORDER AND ORDER
[1]
The
Defendants, Sanofi-Aventis Canada Inc. (“Sanofi Canada”) and Sanofi-Aventis Deutschland GmbH
(“Sanofi Germany”) have brought this motion
for an Order:
a)
striking
the following paragraphs, or portions thereof, from the Third Amended Statement
of Defence and Counterclaim of Novopharm Limited (“Novopharm”):
(i)
Paragraphs
76(h) and 138-140 (disgorgement of profits claim):
(ii)
Paragraph
143A and the phrases “and by Sanofi Germany” and “and Sanofi Germany” in paragraph 143B (Sanofi Germany claim); and
(iii)
The phrase
“and a permanent loss of market share” in paragraph 135, and paragraphs 136 and
143 (Permanent Loss of Market Share claim).
b)
directing
that Novopharm amend its pleading to remove the claim related to the recovery
of costs incurred during the proceedings under the Regulations or,
alternatively, an Order striking the phrase “and expenses incurred in defending
the proceedings in Court File Nos. T-1965-05 and T-1979-05 and Appeals there
from to the extent not recovered in those proceeding” in paragraph 76(g)
(“costs claim”);
c)
directing
that Novopharm amend its pleading to remove the claim related to the 1.25 mg
capsule, or alternatively, an Order striking the phrase “and August 2, 2006 in
the case of Novo-Ramipril 1.25 mg capsules” in paragraph 76(g), and paragraph
133 (“1.25 mg capsule claim”); and
d)
dismissing
the action against Sanofi Germany.
[2]
The
Defendant by Counterclaim Schering Corporation (“Schering”), has also brought a
motion, for an Order:
(a)
Striking
out paragraphs 76-144 of Novopharm’s Third Amended Counterclaim as against
Schering, and in particular, an Order removing “Schering Corporation” from the
style of cause and the references to Schering in paragraphs 76(g), 76(h), and
138-143B; and
(b)
Dismissing
the Counterclaim against Schering;
Background
[3]
This
present proceeding was commenced as an action for patent infringement by Sanofi
Canada, Sanofi Germany and Schering, against
Novopharm Limited in respect of Novopharm’s alleged infringement of Canadian
Patent 1,341,206 (the “206 Patent”) and the sale of its Novo-ramipril product.
The 206 Patent, owned by Schering, claims the compound ramipril. Sanofi Canada sells a ramipril product in Canada, under licence, under the
brand name ALTACE.
[4]
In
response to the Statement of Claim, Novopharm counterclaimed for, among other
things, an order pursuant to section 8 of the Patented Medicines (Notice of
Compliance) Regulations (“Regulations”), requiring the Defendants by
Counterclaim, to compensate Novopharm for losses suffered and/or an order for
disgorgement of profits generated by the sale of ramipril during the period of
time Novopharm was not in receipt of a Notice of Compliance (“NOC”) due to
proceedings that had been commenced under section 6 of the Regulations.
[5]
The trial
of Novopharm’s section 8 counterclaim was held in abeyance pending the trial in
the main action and a decision on infringement and the validity of the 206
Patent. On June 29, 2009, Justice Snider dismissed the Plaintiffs’ claims and
declared claims 1, 2, 3, 6 and 12 of the 206 Patent invalid. Accordingly,
Novopharm’s counterclaim is now proceeding.
[6]
At the
hearing of this motion on October 19, 2009, Novopharm advised that it has
discontinued its claim for disgorgement of profits as set out in paragraphs
76(h) and 138-140 of its counterclaim, and is also seeking leave to amend the
counterclaim to remove the costs claim as set out in paragraph 76(h) of the
current pleading and to remove the counterclaims as they relate to the
Novo-ramipril 1.25mg capsules as set out in paragraphs 76(g) and 133 of the
current pleading. Novopharm is continuing to seek to recover its damages
pursuant to section 8 of the Regulations from Sanofi Canada, Sanofi Germany and Schering.
[7]
Novopharm’s
section 8 claim is brought in respect of several patents listed on the Patent
Register pursuant to the Regulations and corresponding proceedings for
orders of prohibition commenced by Sanofi Canada. Novopharm claims it was delayed in
receiving its NOC for its Novo-ramipril product because it was required to
address the listed patents and respond to the two prohibition proceedings:
T-1965-05 and T-1979-05 that were commenced by Sanofi-Canada in response to the
Notices of Allegations delivered by Novopharm, as required by the Regulations.
[8]
Schering
was not a party in Court File T-1979-05 – the patents involved, Canadian Patent
Nos. 2,023,089; 2,055,948; 2,382,387 and 2,382,549 were listed on the Patent
Register by Sanofi Canada. In Court File T-1965-05,
the 206 Patent was the patent at issue. Sanofi Germany was not a party; as the owner of the 206
Patent, Schering was a required party pursuant to section 6(4) of the Regulations.
[9]
The
application in T-1965-05 was commenced on October 31, 2005 and was dismissed by
the Federal Court on September 26, 2006 (as upheld by the Federal Court of
Appeal). The application in T-1979-05 was commenced on November 2, 2005 and
was dismissed by the Federal Court on April 27, 2007. Novopharm received its
NOC for its Novo-ramipril product on May 2, 2007.
Are Sanofi Germany and Schering Proper Parties
to the Section 8 Claim?
[10]
Section 8
of the Regulations creates a statutory cause of action whereby liability
for damages may be found in circumstances where an application for an order
prohibiting the Minister of Health from issuing a NOC is withdrawn,
discontinued or dismissed. Section 8 provides that this liability for damages
is that of a “first person”, and states that prospect in the following terms:
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
(c)
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
concludes that
(i)
the
certified date was, by the operation of An Act to amend the Patent Act and
the Food and Drugs Act (The Jean Chretien Pledge to Africa), chapter 23 of
the Satutes of Canada, 2004, earlier than it would otherwise have been and
therefore a date later than the certified date is more appropriate, or
(ii)
a date other
than the certified date is more appropriate; and
(d)
ending on
the date of the withdrawal, the discontinuance, the dismissal or 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)
If a court
orders a first person to compensate a second person under subsection (1), the
court may, in respect of any loss referred to in that subsection, make any
order for relief by way of damages that the circumstances require.
(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).
(6)
The
Minister is not liable for damages under this section.
[11]
Accordingly,
as set out in subsection 8(2) the right of action of the “second person” for
damages is only as against the “first person”. Section 2 of the Regulations
defines the “first person” as the person referred to in subsection 4(1).
Section 4(1) of the Regulations provides that a first person is the
person who filed a new drug submission (“NDS”):
4(1) A first person who files or who
has filed a new drug submission or a supplement to a new drug submission may
submit to the Minister a patent list in relation to the submission or
supplement for addition to the register.
[12]
Where a
“second person”, usually a generic drug manufacturer, seeks to make reference
to that new drug submission for the purpose of obtaining expedited regulatory
approval – an NOC for its product, the “second person” must, under section 5 of
the Regulations, address any listed patent by way of a Notice of
Allegation (“NOA”) delivered to the “first person”. The second person may, in
the NOA, allege non-infringement and/or invalidity of the patent(s). The
“first person” then has a right under section 6(1) of the Regulations,
in respect of the NOA, to commence an application for judicial review to the
Federal Court for an order prohibiting the Minster of Health from issuing the
NOC to the second person on the basis that the allegations of non-infringement
and/or invalidity in the NOA are not justified.
[13]
It is the
delay arising from the time required for the application(s) commenced by the
first person to be determined, in the event the second person is successful in
obtaining the NOC, that gives rise to a claim for damages under section 8 of
the Regulations. Pursuant to subsection 6(1) of the Regulations,
the right to commence the application for an order of prohibition is
exclusively that of the “first person”. If such application is commenced and
the “first person” is not the owner of the patent, the owner of the patent must
be made a party to the application pursuant to subsection 6(4) of the Regulations.
[14]
It is
therefore only by operation of, or under the scheme of the Regulations
that (a) any right to claim damages by a second person arises; and (b) that any
such claim can only be asserted by the second person as against the first
person.
[15]
In the
within proceeding, Novopharm is seeking damages from the three named Defendants
by Counterclaim alleging each, jointly and severally, are liable as the “first
person” for the purposes of section 8 damages under the Regulations.
Each of these Defendants submit that the matter of who is the “first person” is
a straightforward exercise of statutory interpretation, and that there cannot
be multiple first persons under the Regulations as they currently read.
The Defendants submit that the first person is and can only be Sanofi Canada, and it is only Sanofi Canada that can be liable under the Regulations
to pay section 8 damages to the second person, in this case Novopharm.
[16]
Novopharm
submits that the definition of “first person” under section 8 of the Regulations
ought to be read purposively and does not preclude Novopharm’s claim against
either Schering or Sanofi Germany. In respect of Schering,
Novopharms submits that:
(i)
Schering
knew of, authorized and directed steps taken by Sanofi Canada in the litigation under the Regulations;
(ii)
Schering
participated fully and actively in all proceedings under the Regulations –
“aggressively” seeking to prevent Novopharm from obtaining its NOC for its
Novo-ramipril product through its filing of affidavits, and making written and
oral submissions;
(iii)
Schering
assisted in listing the 206 Patent on the Patent Register; and
(iv)
Schering’s
involvement had a material impact on Novopharm, causing it damages, loss and
harm.
[17]
In respect
of Sanofi Germany, Novopharm submits:
a. Sanofi Germany exercises
complete control over the actions of Sanofi Canada and that all of Sanofi Canada’s actions
were directed, required or otherwise controlled by Sanofi Germany using Sanofi Canada as its “instrument”;
b. Sanofi Germany participated fully and
actively as a co-applicant in the proceedings under the Regulations –
“actively” seeking to prevent Novopharm from obtaining its NOC for its
Novo-ramipril product; and
c. Sanofi Germany benefited from the delay in
Novopharm’s market entry.
[18]
The Third
Amended Counterclaim pleads Novopharm’s allegations as follows:
143A Novopharm states that Sanofi
Germany exercises complete control over the actions of Sanofi Canada and states
that the aforementioned actions were all directed, required or otherwise
controlled by Sanofi Germany utilizing Sanofi Canada as its instrument. The
actions of Sanofi Canada and Sanofi Germany
were all part of a common enterprise carried out by Sanofi Canada pursuant to
the direction and on behalf of Sanofi Germany.
Accordingly, the actions of Sanofi Canada
must in law and in equity be treated as the acts of Sanofi Germany which, therefore, is also
liable to Novopharm.
[19]
The same
is not said of Schering:
143B Novopharm further states that all
steps taken by Sanofi Canada and by Sanofi Germany were carried out with the knowledge,
authority and directions of Schering, such as to make Schering liable for any
unlawful actions committed by Sanofi Canada and Sanofi Germany.
[20]
The issue on
this motion then is whether it is “plain and obvious” that the interpretation
of “first person” advanced by Novopharm is not available, and that it is
certain that liability for section 8 damages can only attach to the person who
filed the NDS and patent list.
[21]
Novopharm
submits that a broader interpretation of “first person” to include persons
other than the person that filed the NDS and patent list is consistent with
Justice Evans’ reasons in Apotex Inc. v. Eli Lilly and Company, 2004 FCA
358, who at para. 14 stated:
In my respectful opinion, therefore, the
Motions Judge erred in law in the exercise of her discretion when she said that
whether Lilly U.S. controlled Lilly Canada as alleged in Apotex’ pleadings
could not be relevant to whether Lilly U.S. was a “first person” because of the
statutory nature of Apotex’ cause of action. Whether, for the purpose of
section 8, a “first person” includes the corporation who directed the
submission of the patent list in the name of the subsidiary is a sufficiently
difficult legal question to require a trial.
[22]
The moving
parties submit that this decision must be put in its proper context – that it
was applicable when the potential for recovery of the first person’s profits,
as opposed to only the second person’s damages was as yet undecided. It is in
that scenario that might lead to a broader interpretation of the term “first
person” or a need to include companies related to the first person to “follow
the money”. As it is now settled, however, that the recovery of a first
person’s profits is not available in an action under section 8 of the Regulations,
(Merck Frosst Canada Ltd. and Merck Frosst Canada & Co. v. Apotex Inc.,
2009 FCA 187, leave to SCC denied January 28, 2010), the moving parties submit
Sanofi Germany and Schering are no longer proper or necessary parties and that
as against them, there is no cause of action.
[23]
Justice
Evans’ comments, however, are not clearly and without doubt, restricted to the
possible relevance of findings of agency and control solely for the purposes of
following a money trail to determine profits. At paras. 11-13, Justice Evans
noted:
That common law concepts, such as agency,
for example, are never relevant to the interpretation of legislation is a very
broad proposition, for which no supporting authority was advanced. Indeed, it
is clear from the cases relied upon by Apotex that, in some circumstances at
least, whether a wholly owned subsidiary has acted, in effect, as the agent of
its shareholder corporation may be relevant in determining the liability of the
parent under a taxing statute…
In my opinion, the assertions of complete
corporate control in Apotex’s pleadings go beyond asserting the kind of
relationship between Lilly U.S. and Lilly Canada that
inevitably exists between a corporation and its sole shareholder. It might
emerge on discovery that the degree of control exercised by Lilly U.S. over Lilly Canada was such as to make
Lilly U.S. a “first person”.
[24]
At
paragraph 15 of his reasons, Justice Evans refers to the relevance of such
inquiry and fact finding, for example, to the extent profits might be
recoverable. At paragraph 16 of the reasons, he states to the effect that if
notions of agency or control are relevant to determining whether someone other
than the person filing the NDS and patent list is the “first person”, findings
of fact will be required that can only properly be made in the context of a
trial in order to determine the degree of control exercised over the purported
nominal first person.
[25]
Novopharm
raises reasons other than following the trail of profits to argue why such
findings could be relevant and necessary so as to apply the purposive
interpretation it urges to include parent, related or other companies in the
definition of “first person”. For example, there may be issues of recovery and
the ability to satisfy an award of damages. Business operations may be
organized such that “first persons” may be only nominal entities with
insufficient assets.
[26]
Whether or
not there are problems of nominal or first persons unable to satisfy an entire
damage award in the within case is not the issue on this motion - the issue is
whether there is any resolution of the proper interpretation of the Regulations.
In that regard, and having regard to the Court of Appeal decision in Lilly,
it is settled law that contentious issues of statutory interpretation or
legal argument should not be dealt with on motions to strike pleadings, but
rather should be left for determination at trial.
[27]
Whether a
“first person” under the Regulations may include persons other than the
person who filed the NDS and patent list (or cannot include them without
amendment to the Regulations) has not yet been fully canvassed at trial,
and has yet to be finally determined. Thus, it is clear that this issue ought
not to be decided on a motion to strike, where sufficient material facts have
otherwise been pleaded to support the claim. Novopharm has done so in respect
of Sanofi Germany. However, even if
Novopharm’s broader interpretation of “first person” is accepted, the
allegations as against Schering fail to meet the requirement of pleading
sufficient material facts that if proven, would enable a Court to make a
finding that Sanofi Canada was an agent, acting as nominal first person,
directed and controlled by Schering. Schering and Sanofi Canada are unrelated parties.
Novopharm has not pleaded that Schering is a “first person” that exercises
“complete control” over Sanofi Canada. I am satisfied that in any
event of the disposition of the first person issue, it is plain and obvious
that Novopharm’s claim for section 8 damages against Schering is clearly doomed
to fail.
Permanent Loss of Market Share
[28]
Novopharm
concedes at paragraph 50 of its written representations that the allegations
set out in paragraphs 135, 136 and 143 of the Third Amended Counterclaim relate
to the future and permanent loss of market share and may not give rise directly
to an award of damages. Yet Novopharm resists the motion to strike those
paragraphs on the grounds that they clearly demonstrate the nature and the
extent of the harm that has been caused to Novopharm, and that it is relevant
to the Court’s assessment of Novopharm’s damages. However, whatever damages
Novopharm may be entitled to shall be determined on the basis of the window of
recovery provided by section 8 of the Regulations – those damages are
restricted to compensation for the loss suffered during the period of operation
of the automatic stay.
[29]
Reference
to permanent loss of market share and the alleged denial of an opportunity to
enhance Novopharm’s reputation affecting the introduction of new products in
advance of competitors and sales of non-ramipril products is not relevant to
the calculation of damages under section 8 of the Regulations in this
action. As noted by the Court of Appeal in Apotex v. Merck & Co.
(2009), 76 CPR (4th) 1 (FCA) at paragraphs 101- 102:
101...the Governor General focused on
this very issue, and chose to limit the measure of the losses which can be
compensated by way of damages to those suffered during the period. No
issue of principle flows from this. The Governor-in-Council could have
extended the measure of the losses to include those caused during the
period, regardless of when they are suffered. However, it did not do
that.
102 The Governor-in-Council’s clearly
expressed intent must be given effect to. This excludes compensation for
losses occurring in future years since such losses cannot be said to have been
suffered during the period. It follows, for instance, that Apotex’s entitlement
to damages for lost sales resulting from the alleged decrease in its market
share must be confined to sales that can be shown to have been lost within the
period. In order to be compensated, the losses must be shown to have been
incurred during the period.
[30]
Accordingly,
it is appropriate to strike the impugned paragraphs as they are not relevant
and do not disclose a reasonable cause of action.
ORDER
THIS COURT ORDERS that:
1.
The Third
Amended Counterclaim as against Schering Corporation is struck and hereby
dismissed.
2.
The phrase
“and a permanent loss of market share” in paragraph 135; the whole of paragraph
136; and the sentences “Moreover, Novopharm will be unable to capture a larger
percentage of the market share over time due to its late entry. Accordingly,
Novopharm claims its damages for lost market share as well” in paragraph 143
are struck.
3.
Novopharm
shall, within twenty days of the date of this Order, serve and file a Fourth
Amended Counterclaim consistent with the reasons and this Order, including an
amendment to the style of cause to remove reference to Schering Corporation.
4.
The
balance of the motion filed by Sanofi-Aventis Canada Inc., and Sanofi-Aventis
Deutschland GmbH is dismissed.
5.
In the
event the parties cannot agree on costs, each may submit written submissions,
no longer than three pages in length, within twenty days of the date of this
Order.
“Martha
Milczynski”
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