Date: 20110303
Docket: T-1548-10
Citation: 2011 FC 255
Ottawa, Ontario, March 3,
2011
PRESENT: The Honourable Madam Justice Snider
BETWEEN:
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ELI LILLY CANADA INC.,
ELI LLILY AND COMPANY,
ELI LILLY AND COMPANY LIMITED
AND ELI LILLY SA
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Plaintiffs
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and
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NU-PHARM INC.
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Defendant
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REASONS FOR ORDER AND
ORDER
I. Background
[1]
The
Plaintiffs, Eli Lilly Canada Inc., Eli Lilly and Company, Eli Lilly and Company
Limited and Eli Lilly S.A. (collectively referred to as Eli Lilly or the
Plaintiffs), hold patent rights to Canadian Letters Patent No. 2,041,113 (the '113
Patent). The '113
Patent claims the compound olanzapine, a medication useful in the treatment of
various disorders of the central nervous system. Olanzapine is sold by Eli
Lilly using the trade name ZYPREXA. By Statement of Claim issued September 27,
2010, the Plaintiffs commenced an action for patent infringement against
Nu-Pharm Inc. (Nu-Pharm or the Defendant).
[2]
In response to the Plaintiffs’ action, Nu-Pharm brought a
motion to strike the Statement of Claim. In an Order dated November 16, 2010,
Prothonotary Milczynski struck out the Plaintiffs’ claim and awarded costs of
$3000 to Nu-Pharm. The Plaintiffs now seek an Order setting aside the November
16, 2010 Order.
II. Standard of
Review
[3]
The parties are agreed that the decision of the
Prothonotary to strike the Statement of Claim raises a question vital to the
final issue of the case. Where a Prothonotary’s decision raises a question vital
to the final issue of the case, the standard of review is de novo (Canada
v Aqua‑Gem Investments Ltd., [1993] 2 FC 425, [1993] 1 CTC 186 at
pages 462-463 (FCA); Merck & Co., Inc. v Apotex Inc., 2003 FCA 488,
315 NR 175 at paragraph 19). This means that I must conduct an analysis of the
issues without any deference to the Prothonotary’s findings in her decision of
November 16, 2010.
[4]
The overarching question before me is whether the
Plaintiffs’ claim should be struck. In my view, for the reasons below, I agree
with Prothonotary Milczynski and would strike the Statement of Claim.
III. Relevant
Principles
[5]
Before examining the merits of the appeal, it is useful to
review the principles related to the striking of a claim.
[6]
The purpose of pleadings is to define the question in
controversy between the litigants and to give the defendant fair notice of the
case to be met (Weatherall v Canada (AG), [1989] 1 FC 18, 86 NR 168
at paragraph 14).
[7]
Rule 174 of the Federal Courts Rules, SOR/98-106
[the Rules] states that, “Every
pleading shall contain a concise statement of the material facts on which the
party relies, but shall not include evidence by which those facts are to be
proved.” The Federal Court of Appeal in Merchant Law Group v Canada (Revenue
Agency), 2010 FCA 184, 321 DLR (4th) 301 at paragraph 34 stated:
[I]f the requirement of pleading material facts did not
exist in Rule 174 or if courts did not enforce it according to its terms,
parties would be able to make the broadest, most sweeping allegations without
evidence and embark upon a fishing expedition. As this Court has said, "an
action at law is not a fishing expedition and a plaintiff who starts
proceedings simply in the hope that something will turn up abuses the court's
process": Painblanc v. Kastner (1994), 58 C.P.R. (3d) 502, 176 N.R. 68
(Fed. C.A.) at paragraph 4.
[Emphasis added.]
[8]
Rule 221(1)(c) of the Rules permits the Court to
strike out a pleading that is “scandalous, frivolous or vexatious” or “is
otherwise an abuse of the process of the Court”. A wealth of jurisprudence
provides some guideposts for this analysis.
[9]
An action must do more than present mere allegations.
Stated differently, an action is not a fishing expedition. As noted by Justice
Addy, in Caterpillar Tractor Co. v Babcock Allatt Ltd., [1983] 1 FC 487,
67 CPR (2d) 135 at paragraphs 13, aff’d (1983), 72 CPR (2d) 286, [1983] FCJ No
528 (QL) (FCA):
It is not an answer to
an application to strike out, for the party to say that, if he had unrestricted
discovery of his opponent, he might then be in a position to sustain the
allegations.
[10]
In the context of an action for patent infringement, the
Defendant argues that, the Plaintiff must give details of the activities that
allegedly contribute to the alleged infringement. I agree. If the “material
facts” of the infringement are not present, the Statement of Claim should be
struck out.
[11]
However, the threshold for striking out a statement of
claim is high. As discussed by Justice Layden-Stevenson (as she was then), in Pharmaceutical
Partners of Canada Inc. v Faulding (Canada) Inc. (2002), 21 CPR (4th) 166, [2002] FCJ No 1305 (QL) (FCTD)
at paragraph 13, a statement of claim should not be struck out:
[S]o long as a cause
of action, however tenuous, can be gleaned from a perusal of the statement of
claim. The onus, on the party moving to strike, is heavy and it must be shown
that it beyond doubt that the case cannot possibly succeed at trial.
[12]
The Supreme Court of Canada in Hunt
v. T & N plc, [1990] 2 S.C.R. 959, 74 DLR (4th) 321 articulated the test
to be applied before a pleading is struck. At paragraph 33, Madam Justice
Wilson stated:
As in England, if there is a chance that the plaintiff might succeed,
then the plaintiff should not be “driven from the judgment seat”. Neither the
length and complexity of the issues, the novelty of the cause of action, nor
the potential for the defendant to present a strong defence should present the
plaintiff from proceeding with his or her case.
[13]
In general terms, it appears to me that a statement of
claim for an infringement of a patent right should clearly show:
·
the facts by virtue of which the law recognizes a defined
right as belonging to the plaintiff, and
·
the facts that constitute an encroachment by the defendant
on that defined right of the plaintiff
IV. Application of
the Principles
[14]
In the case at bar, I accept that the Statement of Claim
shows the facts by virtue of which the law recognizes a defined right as
belonging to the Plaintiffs. However, the question in this case is whether the
Statement of Claim sets out the facts that constitute an encroachment by the
defendant on that defined right of the plaintiff. I will review the Statement
of Claim and the material facts pleaded.
[15]
In summary form, the Plaintiffs submit that their Statement
of Claim clearly pleads that Nu-Pharm’s actions in submitting an abbreviated new drug submission (ANDS) pursuant to the applicable
provisions of the Food and Drug Regulations, CRC 1978, c 870 [the Food
and Drug Regulations], and the publication of a Notice of
Compliance (NOC) and Drug Identification Number (DIN) constitute infringement
of the '113 Patent and thus the pleadings are sufficient to permit
the action to proceed. They also rely on the results of their cross-examination
of Mr. Richard Benyak, President of Nu-Pharm, to argue that the actions of
Nu-Pharm (or an unidentified third party) do or will extend beyond the bounds
of obtaining an NOC.
[16]
In their Statement of Claim, the Plaintiffs include the
following claims:
19. The
defendant has, without consent of the Plaintiffs, purchased, made, or had made
for it either in Canada or abroad, constructed or had constructed for it either
in Canada or abroad, imported or had imported for it into Canada, sold or
exported from Canada for sale abroad, used in Canada and intends to make,
construct, use and sell to other to be used, the compound olanzapine. More
particularly, Nu-Pharm has done and intends to do each of the following in
relation to the compound olanzapine:
(a) Manufacture
the compound;
(b)
Have the compound manufactured for it;
(c)
Purchase and import the compound into Canada;
(d)
Formulate tablets containing the compound;
(e)
Have formulated tablets containing the compound;
(f)
Sell and distribute and arrange for the distribution of tablets containing
the compound in Canada; and
(g)
Export from Canada tablets containing the compound.
21. In
particular, the defendant has developed a generic version of olanzapine, and
has filed an abbreviated new drug submission (“ANDS”) with the Minister of
Health to enable it to sell its version of olanzapine. Nu-Pharm intends to sell
its version under the brand name Nu-olanzapine and in its ANDS has compared its
olanzapine products with at least Lilly Canada’s ZYPREXA and ZYPREXA ZYDIS
olanzapine. In this regard, Nu-Pharm has imported, manufactured, or had
manufactured for it bulk olanzapine; has formulated or had formulated for it
this bulk material into finished dosage form; has packaged the finished dosage
form to be ready to sell, has stockpiled bulk and/or finished dosage form of
olanzapine to sell, and has offered for sale and sold olanzapine in finished
dosage form.
[17]
In her decision, Prothonotary Milczynski provided the
following reasons for striking the Statement of Claim:
The Plaintiffs state that they are not aware of the “full
extent” of Nu-Pharm’s allegedly infringing activities. However, as the
Statement of Claim clearly indicates, the Plaintiffs are unaware to any
extent of the Defendant’s alleged infringing activities. The allegations
are bare assertions without foundation or material facts. The Plaintiffs
conceded at the hearing of this motion that the fact of obtaining a Notice of
Compliance under the Patented Medicines (Notice of Compliance) Regulations is
not pleaded to, in and of itself, constitute an infringement of the 113 Patent.
As the evidence filed on this motion through the affidavit of Richard Benyak
shows, since receiving the NOC, Nu-Pharm has not manufactured olanzapine or had
olanzapine manufactured for it, purchased or imported olanzapine or had
olanzapine imported for [it], formulated olanzapine or had olanzapine
formulated for it, packaged, stockpiled, or exported olanzapine, offered it for
sale or distributed or arranged for its distribution.
[18]
Pivotal in the reasoning of Prothonotary Milczynski was the
case of AstraZeneca Canada Inc. v Novopharm Ltd., 2009 FC 1209, 80 CPR (4th) 397 [AstraZeneca FC],
aff’d 2010 FCA 112, 83 CPR (4th) 241 [AstraZeneca FCA].
In her reasons, Prothonotary Milczynski stated:
As the Court noted in AstraZeneca
Canada Inc. v. Novopharm Ltd. (2009), 80 CPR (4th) 397 ,
aff’d (2010), 83 CPR (4th) 241, where a plaintiff can present no
rational argument based on evidence or the law in support of the claim, the
action is an abuse. An action is not a fishing expedition. The Plaintiffs are
not entitled to use bald pleas to force production, discovery and attempt to
“bootstrap” their case. As submitted by Nu-Pharm, an action cannot be brought
on assumptions and speculation in the hopes that something will turn up.
[19]
The facts of AstraZeneca FC bear similarity to those
before me. In that case, the Statement of Claim alleged that the
defendant was currently infringing the plaintiffs’ patent by making or having
made for it commercial quantities of the infringing product (current
infringement), and would infringe the patent upon successfully resisting the
plaintiffs’ pending prohibition application and obtaining an NOC for its
novo-rosuvastatin tablets (quia timet or future infringement). The
motions judge, Justice Roger Hughes, concluded that the claim of current
infringement was an abuse of process as it was based on bald allegations made
without any evidentiary foundation. With respect to the future infringement,
Justice Hughes found that the allegations were speculative in nature and lacked
the degree of certainty required to support a quia timet action.
[20]
The Court of Appeal upheld the decision of Justice Hughes.
Before the Court of Appeal, the plaintiffs argued that the
Notice of Allegation (NOA) served by the defendant constituted, in and of
itself, an act of infringement and that this fact alone is sufficient to ground
an action for infringement. In response to this argument, the Court
of Appeal (AstraZeneca FCA, above, at paragraphs 8-9) stated as follows:
The appellants' final contention — i.e., that the NOA is in
itself an act of infringement and that as this point has yet to be judicially
considered, the claim cannot be said to be bereft of any chance of success — is
not addressed by the Federal Court Judge. The respondent maintains that this is
because the argument was not put to the Federal Court Judge and urges us not to
deal with this argument on that ground.The fact that the argument was not
addressed by the Federal Court Judge does suggest that it was not made or
insisted upon by the appellants. In any event, what the appellants seek to
raise is a novel act of infringement which would have to be specifically
pleaded before it can be addressed. No such allegation is made in the
Statement of Claim.
[Emphasis added.]
[21]
Following the remarks of the Court of Appeal, it appears
that a specific pleading that the ANDS, the NOC and DIN constitute acts of
infringement may be a sufficient basis for allowing the action to
proceed. Before me, the Plaintiffs submit that they have specifically pleaded
this “act of infringement” in paragraph 21 of their Statement of Claim. I do
not agree.
[22]
I accept that there are notable factual differences between
the case before me and that before the Courts in AstraZeneca FC, above:
·
In AstraZeneca FC, the plaintiffs had been requested
and had refused to provide particulars. In this case, no such request has been
made.
·
In AstraZeneca FC, no NOC had been issued. In this
case, an NOC has been issued, indicating that a number of activities must have
taken place, as required under the applicable provisions of the Food and Drug
Regulations.
[23]
Nevertheless, the statements of principle in both AstraZeneca
FC and AstraZeneca FCA are, in my view, equally applicable to this
appeal. In particular, while the Statement of Claim before me is lengthier and
more detailed than that examined by Justice Hughes and the Court of Appeal in AstraZeneca,
it suffers from the same problems.
[24]
The Plaintiffs argue, before me, that the Statement of
Claim clearly discloses that the alleged “act of infringement” is the
preparation of the ANDS and the acquisition of an NOC. The first point to make
is that, in my view, and in spite of the capable written and oral submissions
by the Plaintiffs, the Statement of Claim is not as clear as the Plaintiffs
would have me believe. Before the Prothonotary, the Plaintiffs conceded
the fact that obtaining an NOC was not pleaded. The Plaintiffs now argue
the opposite. While this is a de novo appeal, it seems to me that the
Plaintiffs ought not to be able to resile from admissions made to the
Prothonotary. At the very least, the change of position demonstrates the
problem with the Statement of Claim as drafted. If the pleadings are not clear
to two lawyers working for the same client and the same law firm, how can they
be said to be satisfactory to defend against a motion to strike?
[25]
In any event, even if I accept the arguments that
paragraphs 19-21 of the Statement of Claim plead that the preparation of the
ANDS and the obtaining of the NOC are acts of infringement, I am not persuaded
of the merits of continuing the action.
[26]
Section 55.2(1) of the Patent Act, RSC 1985, c P-4 [the
Patent Act] provides a specific exemption from infringement for the
making, constructing, using or selling of a patented invention solely for the
purposes reasonably related to the development and submission of information
required for regulatory purposes. The Statement of Claim does not address
whether the allegations are directed to activity covered by s. 55.2(1) or
to other activity and, if so, what that other activity is.
[27]
The Plaintiffs argue that Mr. Benyak has acknowledged, in
cross-examination on his affidavit, that the Defendant obtained its NOC with
the goal of selling into government markets and selling its products on tender
and on contract. Thus, the Plaintiffs argue, the activities engaged in by
Nu-Pharm were not “solely” for purposes covered by the s. 55.2(1) exemption. I
do not agree.
[28]
In the Statement of Claim before me, there is absolutely
nothing pleaded that is not part of the regulatory requirements for the
preparation and filing of an ANDS. Without something pleaded beyond the
regulatory requirements, s. 52.2(1) of the Patent Act applies. Moreover,
we have the clear, sworn statements of Mr. Benyak that Nu-Pharm has not done
(or caused to be done) anything other than meet the requirements of the
applicable regulatory scheme. The attempts of the Plaintiffs to characterize
the actions of Nu-Pharm (or an unidentified third party) as something beyond
meeting regulatory requirements are speculative, at best.
[29]
Nor do I believe that, on the facts of this case, it is
necessary for Nu-Pharm to put forward s. 55.2(1) as a defence in a
properly-filed Statement of Defence. The Plaintiffs raise the decision of this
Court in Laboratoires Servier v Apotex Inc., 2008 FC 825, 67 CPR (4th)
241 at paragraphs 163-168 [Servier], aff’d 2009 FCA 222, 75 CPR (4th)
443 as authority for the proposition that a careful examination of facts
related to the question of experimental use must be made; this, the Plaintiffs
assert, requires the Defendant to file a Statement of Defence specifically
pleading the facts related to the exemption. The situation in Servier
was much different. In that case, the acts of infringement were clearly and
explicitly pleaded. The Court only turned to the possible exemptions after it
had already concluded that there had been infringement of a valid patent. The
exercise referred to in the cited passage only took place once the claim of
infringement had been proven. There is no such case before me. The requirement
for “meticulous evidence” (Servier, above, at para. 164) does not arise
where the Statement of Claim does not on its face disclose an act of
infringement.
[30]
In the face of the pleadings before me and s. 55.2(1) of
the Patent Act, the Statement of Claim discloses no reasonable cause of
action.
[31]
Aside from the alleged claim that Nu-Pharm’s actions in
obtaining its NOC and DIN for nu-olanzapine constitute infringement, the
pleadings disclose nothing beyond an assertion that Nu-Pharm is positioning
itself, through an unnamed third party, to enter the market for olanzapine and,
that by doing so, Nu-Pharm will infringe the patent. Quite simply, the
Plaintiffs claim that Nu-Pharm’s business arrangements may yield the basis for
an allegation of infringement once the '113
Patent has expired. In other words, contrary to the submissions of the
Plaintiffs, the Statement of Claim is, at least in part, very much a quia
timet proceeding to which the findings of Justice Hughes and the Court of
Appeal in AstraZeneca FCA are applicable. The Plaintiffs’ allegations
that Nu-Pharm has done something that actually infringes the '113 Patent, or that may permit it to “springboard” to an
act of infringement once the patent has expired, are bare assertions without
foundation or material facts.
V. Conclusion
[32]
In sum, having considered the matter de novo, I
agree with the conclusion of Prothonotary Milcynzski; the Statement of Claim
should be struck. Should the Plaintiffs find further and better support for
their speculations, they are free to bring a new action for infringement with
pleadings that meet the acceptable standards.
[33]
Costs awarded in the hearing of this motion before
Prothonotary Milczynski are affirmed. Costs of this motion are fixed at $2500.
ORDER
THIS COURT
ORDERS that:
1.
the motion in appeal
of the decision of Prothonotary Milczynski is dismissed; and
2.
costs in the amount
of $2500 are awarded to the Defendant.
“Judith
A. Snider”
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