Date: 20070912
Docket: T-161-07
Citation: 2007
FC 907
Toronto, Ontario, September 12, 2007
PRESENT: The Honourable Mr. Justice Hughes
BETWEEN:
SANOFI-AVENTIS CANADA INC.
and
SCHERING CORPORATION
Plaintiffs
and
APOTEX
INC.
Defendant
AND BETWEEN:
APOTEX
INC.
Plaintiff
by Counterclaim
and
SANOFI-AVENTIS CANADA INC.,
SCHERING CORPORATION,
SANOFI-AVENTIS DEUTSCHLAND GmbH and
RATIOPHARM INC.
Defendants by Counterclaim
REASONS FOR ORDER AND ORDER
[1]
Two
matters arising in these proceedings were heard at the same time on Monday,
September 10, 2007. One was an appeal by Apotex Inc. in respect of an Order of
Prothonotary Morneau in these proceedings dated July 20, 2007. The second was
a motion by Sanofi-Aventis Canada Inc. and Sanofi-Aventis Deutschland GmbH to
strike out certain paragraphs of Apotex’s Defence and Counterclaim or, in the
alternative staying proceedings pursuant to those paragraphs. These matters
are closely related, they were argued together and one set of Reasons and one
Order will be issued.
[2]
This
action as instituted January 2007 by the Plaintiffs Sanofi-Aventis Canada Inc.
(Sanofi Canada) and Schering Corporation
against Apotex Inc. as Defendant is a fairly straightforward patent
infringement action. It alleges that certain claims of Canadian Patent 1,341,
206 (the ’206 patent) relate to a drug known as ramipril. It is alleged that
Schering owns the ’206 patent and Sanofi Canada is a licensee. The claim alleges that
Apotex is dealing in ramipril in Canada
without authorization and is infringing those claims of the ’206 patent. The
patent will expire in 2018. An injunction, damages or alternatively profits
are claimed as well as other relief.
[3]
Apotex has
filed a Defence. Infringement is denied and several more or less standard attacks
on the validity or the patent are raised. In addition, however, Apotex has
counterclaimed. The Counterclaim is made not only against the Plaintiffs,
Sanofi Canada and Schering, but adds as
party Defendants-by-Counterclaim, Sanofi-Aventis Deutschland
GmbH (Sanofi Germany) and Ratiopharm Inc.
[4]
The
Counterclaim raises two separate issues as to alleged conspiracy. The first
conspiracy, so called, is in respect of conflict proceedings in the Canadian
Patent Office and later in this Court as between, among others, Schering and
Sanofi Germany. The ultimate result of these
proceedings was the grant of the ’206 patent to Schering. Pleadings in respect
of this first conspiracy are set out at paragraphs 61 to 72 of the Counterclaim
and are not at issue in any of the matters now before me.
[5]
The second
issue raised in the Counterclaim is the so-called second conspiracy or
Pseudo-generic Agreement. Paragraphs 73 to 120 of the Counterclaim dealt with
this allegation. This allegation appears in paragraph 109 to be directed
against all Defendants-by-Counterclaim and specifically mentions Ratiopharm,
Sanofi Germany and Schering. Sanofi Canada is specifically mentioned in
paragraph 110.
[6]
The
Counterclaim ends with paragraph 125 making claims for relief that the ’206
patent, and the pertinent claims should be declared invalid and unenforceable
and, for damages, unspecified as to amount.
[7]
The second
conspiracy alleges, in brief, that an agreement was entered into by the
Defendants-by-Counterclaim whereby a license was given to Ratiopharm, a
generic, to deal in ramipril on a generic basis, which licence was structured
so as to defeat several aspirations of Apotex, another generic, who had to
bring ramipril to the Canadian market the hard way without a license.
[8]
These
second conspiracy allegations were incorporated into paragraph 7 of the Defence
where it is alleged that the Plaintiffs (Sanofi Canada and Schering) are disentitled to any
relief that they claim and in particular disentitled to any claim for profit.
[9]
The second
conspiracy pleadings must be considered in light of an action commenced by
Apotex in the Ontario Superior Court against a number of parties including
corporations then called Aventis Pharmaceutical Products Inc. which is now
known as Sanofi-Aventis Canada Inc. (Sanofi Canada) and Altimed Pharmaceutical
Company Inc. now known as Ratiopharm Inc. In the Ontario action, Apotex makes
allegations that are essentially the same as in the second conspiracy
Counterclaim in this Federal Court action except that they are much broader and
encompass a large number of transactions in respect of a large number of drugs
of which ramipril, the drug at issue in the Federal Court action, is but one.
Paragraph 8 of the most recent Statement of Claim in Apotex’s Ontario action (December 19, 2001)
purports to sweep in activities commencing “… at some time in or around 1994
and continuing to the present…” Apotex claims in the Ontario action relief
including declarations as to unlawful practices contrary to
certain provisions of the Competition Act, certain prohibitions and
damages in the order of $500 million.
[10]
The
Defendants in the Ontario action made an early
challenge to the pleadings which was resolved by a decision of the Ontario
Court of Appeal on December 14, 2000 reported as Apotex
Inc. v. Hoffmann La-Roche Ltd. (2000), 9 CPR (4th) 417.
Since that time the Ontario action appears to have
proceeded at a leisurely pace. The evidence shows that by late 2005 the
parties were still engaged in discovery of documents and, from what I was
advised by counsel on the motion before me, the action is still in the
discovery of documents stage. I am advised that the Ontario action is under case management.
[11]
Therefore,
taking into consideration the Ontario action and the Federal Court
action including the Counterclaim in the Federal action, it can be seen that:
1. The Ontario action includes within its
scope as against Sanofi Canada and Ratiopharm all that which
is within the scope of the Federal Court Counterclaim. The Ontario action however is broader.
The Ontario action was commenced about
seven years before the Federal Court Counterclaim was made and is proceeding
slowly. Apotex, as Plaintiff in the Ontario
action, has carriage of that proceeding and is expected to take all reasonable
measures to move it along.
2. Apotex
has in paragraph 7 of its Defence in the Federal Court action in the opening
words and in sub-paragraph 7(c) made reference to arrangements and agreements
conducted between the Plaintiffs Sanofi Canada and Schering and Ratiopharm. This
conduct, Apotex alleges, disentitles the Plaintiffs Sanofi Canada and Schering to any relief or
at least to profits. The arrangements and agreements Apotex’s counsel advises
are those as pleaded
in respect of the so-called
second conspiracy. Thus the second conspiracy is pleaded by Apotex as a
defence as well as affirmatively in the Counterclaim.
Motion before Prothonotary
Morneau
[12]
Ratiopharm
brought a motion in these Federal Court proceedings that was heard by Prothonotary
Morneau. That motion requested first that the Counterclaim against Ratiopharm
be struck out in its entirety, or in the alternative to stay that
counterclaim. The motion also requested that certain particular pleadings in
the Counterclaim be struck out.
[13]
Prothonotary
Morneau on July 20, 2007 made an Order, which is now under appeal by Apotex.
That Order stayed the Counterclaim as against Ratiopharm and struck out certain
specific pleadings in the Counteraction namely:
-
the
expressions or numbers “32” and “78 and 79” in paragraph 115;
-
the
following words at the end of paragraph 117: “all contrary to subsection 32(1)
of the Competition Act”;
-
the
following words at the end of paragraph 120: “all contrary to sections 78 and
79 of the Competition Act”.
[14]
Apotex has
not appealed from that part of the Order striking those portions of the
pleadings. A question arose as to whether the Order struck those portions as
against Ratiopharm only or as
against all parties. Apotex’s counsel advised that it was
content to have those portions struck as against all parties.
[15]
Prothonotary
Morneau did not strike the Counterclaim in its entirety as against Ratiopharm.
He stayed the Ratiopharm proceeding instead. Ratiopharm has not appealed
against the refusal to strike out the pleading. Such refusal is not explicit
in the Order of Prothonotary Morneau but is implicit in his decision to stay
and to strike only portions of the pleadings.
[16]
Thus, in
respect of Prothonotary Morneau’s Order what I am being asked to consider is
only Apotex’s appeal against that part of the Order that says:
Considering that for the above
reasons, this Court hereby orders that insofar as Ratiopharm is concerned, and
in addition to the partial strike out ordered in the following paragraph,
paragraphs 73 to 120 and 125 c) and d) of the Counterclaim are stayed against
Ratiopharm under subsection 50(1) of the Act;
[17]
At this
point it is important to note that the Prothonotary did not strike out any
portion of Apotex’s Defence, indeed he could not since Ratiopharm was not a
party to the main action. It is only a Defendant-by-Counterclaim.
[18]
The
standard of review to be observed by a Court in dealing with a Prothonotary’s
Order varies having regard to whether the Order disposes of an issue vital to
the case. Where a stay is refused all matters continue to trial and no issue
has been finally determined, the standard is therefore, one of deference as to
matters of discretion (Vogo Inc. v. Acme Window Hardware Ltd. (2004),
256 FTR 37). However, where a stay has been ordered, a vital issue has been
determined, thus the Court should consider the matter de novo (Apotex
Inc. v. AstraZeneca Canada Inc. (2003), 23 CPR (4th) 371 at
para. 11 (FC) aff’d without reference to this point, (2003), 25 CPR (4th)
142 (FCA)). Thus in the present case, I must consider the issue determined by
the Prothonotary de novo.
[19]
Nonetheless,
I come to the same conclusion as Prothonotary Morneau. The Ontario action
instituted by Apotex some seven years previous and in respect of which Apotex
has carriage, encompasses as against Ratiopharm all (and more) than that which
is asserted as against Ratiopharm in the Federal Court Counterclaim. The
relief sought by Apotex in both proceedings is, as against Ratiopharm,
essentially the same.
[20]
Apotex’s
counsel, during the course of argument before me said that he had received
instructions to give the following undertaking to the Court:
“If the appeal from
Prothonotary Morneau’s Order is allowed, Apotex undertakes that no claim for
the ramipril conspiracy as pleaded in paragraphs 73 to 120 of the Counterclaim
will be pursued in the Ontario action.”
[21]
After some
discussion, Apotex’s counsel also advised that the undertaking would be given
if Sanofi’s motion before me were to be dismissed.
[22]
However,
Apotex’s counsel made it clear that Apotex wished to continue to assert, as a
defence, all factual circumstances as alleged in these paragraphs. Thus the
parties would still be obliged to pursue on discovery and at trial, the matters
as alleged in those paragraphs. I view the saving in time and expense, to be
marginal, if any.
[23]
The
Counterclaim as against Ratiopharm, if allowed to continue would result, in
that party being “twice vexed” in the Federal Court and the Ontario Court, a
matter considered as an abuse of process by the Supreme Court of Canada in Toronto
(City) v. CUPE, Local 79, [2003] 3 S.C.R. 77. There is no prejudice to
Apotex. It has its longstanding Ontario
action available for seeking the same relief against Ratiopharm. The Stay of
the Counterclaim against Ratiopharm does not impact upon its Defence in the
Federal Court action since Ratiopharm is not a party to the main action.
[24]
Therefore,
the appeal against the Order of Prothonotary Morneau will be dismissed with
costs to Ratiopharm at the middle column III.
Sanofis’s Motion
[25]
Sanofi
Canada and Sanofi Germany have, jointly, brought a
motion before me to strike out paragraphs 7(c), 15 and 16 of the Defence and
all of the Counterclaim as against them, or, alternatively they request a stay
of proceedings against them pursuant to those paragraphs.
[26]
As with
Ratiopharm, it is clear that Apotex’s Ontario
action seeks essentially the same relief as against Sanofi Canada in the Federal Court
Counterclaim. Sanofi Germany is not a party to the Ontario action. The allegations made against
Sanofi Germany in the Federal Court
Counterclaim are found in paragraph 109 of the Counterclaim. It alleges that
the so called Pseudo-Generic Agreement was “… pursuant to the direction and
authority of Sanofi Germany and Schering,” and in paragraph 123 where
it is alleged that Sanofi Germany exercised control over Sanofi Canada
such that Sanofi Germany is liable to Apotex. Thus it is
evident that the relief sought against Sanofi Canada in the Ontario action
would encompass that sought against Sanofi Germany in the Counterclaim and, if
there was doubt, Apotex would have its remedy in seeking joinder, if proper, of
Sanofi Germany in the Ontario action.
[27]
Thus I
view the Counterclaim as duplicative of the larger Ontario action and should be
stayed as against Sanofi Canada and Sanofi Germany.
[28]
However,
with respect to paragraphs 7, 15 and 16 of the Defence, that defence, if
successful would deprive Sanofi Canada (Sanofi Germany is not a Plaintiff) of its rights, if
any, to seek the relief claimed by it or at least profits. However Sanofi
Canada is not the owner of the ’206 patent at issue, it is a licensee as
pleaded in paragraph 8 of the Statement of Claim, a matter in respect of which
Apotex pleads in paragraph 2 of its Defence that it has no knowledge. As a
licensee the only relief to which Sanofi Canada is entitled is that afforded by
section 55 of the Patent Act, R.S.C. 1985, c. P-4 as applicable to
patents applied for before October 1, 1989 of which the ’206 patent is
one; namely damages. Sanofi Canada cannot seek an injunction or profits or
any equitable relief. Apotex, at paragraph 58 of its Defence, submits that the
action be dismissed and at paragraph 7 denies that any of the Plaintiffs are
entitled to any relief, including that of damages.
[29]
Given that
Sanofi Canada as licensee, cannot seek equitable relief, it is appropriate at
this point to consider the motion to strike. In this regard, the development
of the law in respect of
pleading breaches of the Competition Act or its
predecessor the Combines Investigation Act as a defence in intellectual
property proceedings must be considered.
[30]
The first
time such a matter was considered was in respect to an Industrial Design
infringement action in RBM Equipment Ltd. v. Philips Electronics Industries
Ltd. (1973), 9 CPR (2d) 46. In that case Thurlow J.A. for the Federal
Court of Appeal held at page 59:
It seems, therefore, to be an
open question whether the Court will ever decline relief in an infringement
action to a party holding the title to industrial property save where what it
is being sought in the action is in substance the enforcement or furtherance of
the illegal conspiracy or agreement itself.
[31]
The next
case is that of Eli Lilly and Co. v. Marzone Chemicals Ltd. (1979), 29
CPR (2d) 253 (FCTD) in which Addy J. stated at page 255:
A more cogent reason, however,
is that the plaintiffs are seeking equitable relief and must come into the
Court with their hands clean. Should they in fact be in breach of the Combines
Investigation Act, as alleged in para. 9 of the statement of defence, this
would constitute a most valid reason for refusing injunctive relief although
the allegations might well not constitute a defence to a claim at law.
[32]
However
the view expressed by Addy J. in the Trial Division has been restated by the
Federal Court of Appeal in Procter & Gamble Co. v. Kimberley-Clark of
Canada Ltd. (1990), 29 CPR (3d) 545 at 546 when Hugessen J.A. for the Court
said:
Where all of the view that the
motions judge erred in law since these allegations [breaches of the Competition
Act] can simply have no bearing on the defence to the plaintiffs’ action for
patent infringement. The motions judge indicated [at p. 230] that, because
para. 16 speaks to plaintiffs’s entitlement to equitable remedies, the
amendment would be relevant to the court’s “discretion to grant or refuse such
relief having regard to all of the surrounding circumstances including the past
conduct of the plaintiffs.” This is error. For past conduct to be relevant to
a refusal of equitable relief under the “clean hands” doctrine, relief to which
the party would otherwise be entitled, such conduct must relate directly to the
subject-matter of the plaintiffs’ claim, in this case their patent…
[33]
These two
cases, Eli Lilly and Procter & Gamble were considered by
Rothstein J. (as he then was) in the Federal Court in Visx Inc. v. Nidek Co.
(1994), 58 CPR (3d) 51. He concluded at page 53:
It is apparent that it is not any alleged inappropriate
conduct of a party that may be relevant in the consideration of whether or not
to grant equitable relief. The inappropriate conduct must relate directly to
the subject-matter of the plaintiff's claim.
In the case at bar, it may be that the plaintiff should not
collect royalties in the way it is alleged it does.
Or it may be that its conduct is contrary to certain
provisions of the Competition Act. However, even if the plaintiff is acting
inappropriately, such actions do not relate directly to the plaintiff's patent
or whether the defendants are infringing that patent. There is no suggestion
that the patent is invalid or otherwise cannot form the basis of a patent
infringement action; nor is it suggested that these allegations, in some way,
indicate there is no patent infringement. It has not been demonstrated that
such conduct is directly related to the plaintiff's claim.
[34]
The last
decision to be considered is that of the Federal Court of Appeal in Volkswagen
Canada Inc. v. Access International Automotive Ltd., [2001] 3 FC 311. That
Court reviewed the Procter & Gamble decision and apparently, the Visx
decision by Rothstein J. although it is wrongly cited in the reasons as 68 CPR
(3d) 272 and 72 CPR (3d) 19 (those decisions in Visx related to another
pleading in that case, not a Competition Act pleading). In Volkswagen,
Sharlow J.A. for the Court held at paragraphs 25 and 26:
25 Visx and Procter &
Gamble are two examples in which the alleged breaches of the Competition Act by
a patent holder did not cast any shadow on the patent rights themselves.
Therefore, there was no relationship between the alleged unlawful behaviour and
the equitable remedy sought by the patent holder that could support an unclean
hands defence.
26 The Motions Judge concluded
that the same could be said of this case, with the result that there was no
hope of a successful unclean hands defence. I must respectfully disagree. In
this case, Access International wishes to argue that the assignment of
copyright in the VW and Audi logos to Volkswagen Canada is conduct described in
subsection 32(1) of the Competition Act, because the result of Volkswagen
Canada's obtaining the copyright was to unduly limit or prevent competition in
authentic Volkswagen and Audi parts and accessories. This allegation is quite
different from the allegations considered in Visx and Procter & Gamble. In
my view, it is at least arguable [page325] that in this case there is a
sufficient relationship between the copyright and the unclean hands defence
that the equitable remedy might not be granted.
[35]
I conclude
from these decisions that a pleading in a defence which raises, as a defence,
unlawful conduct such as that in contravention of the Competition Act
must relate to the acquisition of title to the patent or other intellectual property
right, or to a claim for equitable relief or both.
[36]
In this
action Sanofi Canada, as licensee, cannot seek
equitable relief nor does it have title to the patent at issue. The patent is
owed by Schering and it is Schering that could make a claim for equitable
relief. Thus the pleadings in paragraphs 7(c), and 15 and 16 of the Defence as
they relate to Sanofi Canada and the allegations raised in
paragraphs 73 to 120 of the Counterclaim, must be struck out.
[37]
As
discussed earlier, the Counterclaim itself against Sanofi Canada and Sanofi Germany is to be
stayed but not struck out since the Counterclaim is an assertive and not
defensive pleading in which the Ontario
action already encompasses the larger picture.
[38]
In the
result paragraphs 7(c), 15 and 16 as they relate to Sanofi Canada and assert what is alleged in
paragraphs 70 to 120 of the Counterclaim are struck out as against Sanofi Canada. The Counterclaim as against
Sanofi Canada and Sanofi Germany as set out in those
paragraphs is stayed. Sanofi Canada and Sanofi Germany are entitled to costs as to
the middle of Column III.
Schering
[39]
Schering
is a Plaintiff in the Federal Court action and a Defendant-by-Counterclaim but
not a party to the Ontario action. Schering was not a
party to any motion before me.
[40]
Schering’s
counsel appeared before me and spoke briefly asking that it be joined in with
Sanofi’s motion. I would only do so if Apotex consented. Apotex did not.
Therefore Schering, should it wish to take any steps in relation to what has
been considered here, must do so in a formal way.
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