Docket: T-2792-96
Citation:
2014 FC 883
Vancouver, British Columbia, September 16, 2014
PRESENT: Prothonotary Roger R. Lafrenière
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BETWEEN:
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MERCK & CO.,
MERCK FROSST CANADA & CO.,
MERCK FROSST CANADA LTD., SYNGENTA LIMITED,
ASTRAZENECA UK LIMITED AND ASTRAZENECA CANADA INC.
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Plaintiffs
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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]
The Defendant, Apotex Inc. (Apotex) has moved
for leave to file an amended Responding Statement of Issues.
[2]
Apotex wishes to argue before a referee
appointed pursuant to Rule 153 of the Federal Courts Rules that the
Plaintiffs are not entitled to any damages for infringement of their patent because,
after issuance of the liability judgment against Apotex and exhaustion of Apotex’s
appeals, but before the hearing of the damages reference, the Supreme Court of
Canada rendered a decision in another proceeding rejecting one of the
principles upon which the trial judge relied in finding that the Plaintiffs’
patent had been validly issued. Apotex also seeks leave to allege that the
Plaintiffs have breached specific provisions of the Competition Act,
such as to disentitle them to damages.
[3]
The motion is opposed by the Plaintiffs on the
grounds that the proposed amendments are untimely, prejudicial and disclose no
reasonable issue that can be dealt with at this stage of the proceeding.
[4]
For the reasons that follow, I conclude that the
motion for leave to amend should be dismissed in its entirety.
Facts
(A) Background
[5]
The facts, gleaned from the pleadings and
various judgments referred to by the parties, are summarized below.
[6]
The Plaintiffs, Merck & Co. Inc. (Merck US), Merck Frosst Canada & Co., Merck Frosst Canada Ltd. (Merck Canada and collectively,
“Merck”) and Syngenta Limited, Astrazeneca UK Limited (Astrazeneca UK) and Astrazeneca Canada Inc. (Astrazenca Canada and collectively, “Astrazeneca”), commenced the
underlying action against Apotex for infringement of Canadian Letters Patent
No. 1,275,350 (the ‘350 Patent) on December 19, 1996.
[7]
The ‘350 Patent is one of six patents divided
out of, and claiming priority from, a single patent application bearing serial
number 341,340 (the ’340 Application). The ‘350 Patent was issued pursuant to
subsection 36(2) of the operative Patent Act RS, c P-4, which provided
that a divisional application could (and in some cases must) be filed if the
patent application describes and claims more than one invention. Subsection
36(4) allowed divisional applications filed in accordance with subsection 36(2)
to claim priority from the date of the relevant patent application.
[8]
The ‘340 Application claimed the invention of a
large class of compounds that included enalapril, enalprilat and lisinopril,
each of which was asserted to be useful for the stated purpose of treating
hypertension. The ‘350 Patent claimed a smaller class of compounds selected
from the larger class in the ‘340 Application (including lisinopril) and
specifically claimed lisinopril itself in Claim 2.
[9]
The Plaintiffs alleged in their Statement of Claim,
as amended, that Apotex infringed Claims 1, 2 and 5 of the ‘350 Patent. Apotex
in turn counterclaimed alleging invalidity of the ‘350 Patent.
[10]
On July 24, 2000, Madam Prothonotary Roza
Aronovitch ordered bifurcation of the issues of liability and damages (the
Bifurcation Order) on consent of the parties, so as to leave discovery and the
calculation of the quantum of damages or profits to a later time.
(B) The Liability Trial
[11]
The trial of the liability phase of the action
commenced on January 9, 2006 before Mr. Justice Roger Hughes. At the trial,
one of Apotex’s arguments was that the ‘350 Patent was void because Merck had
breached the fundamental requirement in the Patent Act that every patent
must disclose a useful invention to the public. More specifically, Apotex
claimed that Merck US obtained six patents, including the ‘350 Patent, in
exchange for disclosure of a single invention in the ‘340 Application.
[12]
Apotex argued that, since Merck only disclosed
one invention in the ‘340 Application, it was only entitled to one patent.
According to Apotex, the ‘350 Patent did not disclose a separate invention and
was therefore not properly issued pursuant to subsection 36(2) of the Patent
Act.
[13]
In his decision dated April 26, 2006 and
reported as Merck & Co Inc v Apotex Inc, 2006 FC 524 (CanLII),
(2006), 53 CPR (4th) 1 (the Liability Judgment), Mr. Justice Hughes held that
Apotex’s argument was barred by issue estoppel because it could have been
raised in earlier litigation relating to the patent for enalapril, which was
also divided out of the ‘340 Application. Despite this conclusion, he proceeded
to consider whether the ‘340 Application disclosed more than one invention.
[14]
Mr. Justice Hughes concluded, albeit with strong
reservations, that each claim in the ‘340 Application disclosed a separate
invention. He considered himself bound by two decisions of Mr. Justice Thurlow in
the Exchequer Court which were upheld by the Supreme Court of Canada and
involved patents similar to the ‘340 application: Boehringer Sohn, CH v Bell‑Craig Ltd [1962] Ex.CR 201; aff’d 1963 CanLII 67 (SCC), [1963] S.C.R. 410 [Boehringer]
and Hoechst Pharmaceuticals of Canada Ltd et al v Gilbert & Company et
al [1965] 1 Ex CR 710; affd 1965 CanLII 52 (SCC), [1966] S.C.R. 189 [Hoechst].
Mr. Justice Hughes reasoned as follows at paragraph 116:
Were
I to approach the matter without jurisprudential constraints, I would readily
find that the ‘340 application is directed to but one invention, a class of
compounds, of which individual compounds such as lisinopril are but
illustrative. However, Boehringer and Hoechst, supra, oblige me
to find otherwise, on the slender basis that there was, in the ‘340 application
not only examples but also specific claims to the individual compounds
enalapril, enalaprilat and lisinopril, each of which, on the theory of those
cases, is a different invention from the class. A higher court may be persuaded
otherwise however, for jurisprudential integrity in this Court, I must find
that the ‘340 application discloses separate inventions to each of the class,
to lisinopril, to enalapril and to enalaprilat.
[15]
Based on the above findings, and for other
reasons, Mr. Justice Hughes rendered judgment declaring the ‘350 Patent to be
valid and infringed by Apotex, awarding damages to the Plaintiffs and directing
a hearing to quantify those damages.
(C) Events Subsequent to Liability
Judgment
(i) Appeal to FCA and Leave to Appeal to SCC
[16]
The Liability Judgment was appealed by Apotex to
the Federal Court of Appeal. On October 10, 2006, the appeal was dismissed: Merck
& Co Inc v Apotex Inc, 2006 FCA 323. The Court of Appeal disagreed with
Mr. Justice Hughes’ finding that Apotex’s argument was barred by issue
estoppel, but endorsed his reliance on Boehringer and therefore upheld
the finding that the ‘340 Application disclosed more than one invention.
[17]
Leave to appeal to the Supreme Court of Canada
was dismissed on May 10, 2007: Apotex Inc v Merck & Co Inc [2006]
SCCA No 507.
(ii) Damages Reference
[18]
On March 22, 2010, the Plaintiffs filed a
requisition to fix the time and place of the Reference, with Merck and
Astrazeneca each delivering a Statement of Issues. Apotex filed its responding
Statement of Issues on September 7, 2010.
[19]
By Order of the Chief Justice dated April 13,
2012, the hearing of the Reference is scheduled to take place on January 12,
2015 for a duration of twenty-five days.
(iii) Teva v Pfizer
[20]
On April 8, 2012, the Supreme Court of Canada
released its decision in Teva Canada Ltd v Pfizer Canada Inc [2012] 3
SCR 625 [Teva]. The issue before the Court in Teva was the
sufficiency of the disclosure in a patent claiming a large number of compounds,
including the molecule sildenafil, that were allegedly effective for the
treatment of erectile dysfunction (the ‘446 Patent). The claims in the
‘446 Patent were structured as “cascading claims” where each claim concerned
progressively smaller groups of compounds and the last two claims each related
to an individual compound. For example, Claim 1 involved over 260 quintillion
compounds: para 73. The ‘446 patent disclosed that one of the claimed compounds
had induced penile erection in impotent males during testing but did not
disclose which compound had been tested.
[21]
Teva had argued at trial that the disclosure in
the ‘446 Patent was not sufficient because a person skilled in the art would
not know which of the claimed compounds was the useful invention. However, Mr.
Justice Michael Kelen in Pfizer Canada Inc v Novopharm Limited, 2009 FC
638 and Federal Court of Appeal in Novopharm Limited v Pfizer Canada Inc,
2010 FCA 242, relying on the decision in Boehringer, both held that
each claim in the ‘446 Patent disclosed a separate invention. Since the
claim for sildenafil was considered its own invention, the issue of finding the
useful invention amid the plethora of claimed compounds did not arise.
[22]
The Supreme Court of Canada allowed Teva’s
appeal, holding that Teva had established its allegation that the ‘446
Patent was not valid. In addressing the nature of the invention, Mr. Justice
Lebel, writing for the Court, stated that the Exchequer Court’s decision in Boehringer
had been misinterpreted. He went on to say at para 57:
It
does not stand for the proposition that every claim in a patent application is
a separate invention. Rather, as Teva points out (A.F., at paras. 106-9), the
court in Boehringer reached the conclusion that each claim in the patent
in question concerned a separate invention only after considering the
specification as a whole. The court did not purport to establish a broad
proposition that in every case, each claim in a patent application concerns a
separate invention. Such a proposition would be contrary to the scheme of the Act.
[23]
Mr. Justice Lebel made specific reference to the
decision of the Federal Court of Appeal on appeal from the Liability Judgment (what
he referred to as “Apotex ACE”) and commented as follows at paras 63 and
64:
[63] In Apotex
ACE, the Federal Court of Appeal varied the Federal Court’s decision in
part, but upheld the conclusion that separate claims disclose separate inventions.
However, as I have stated, this broad conclusion is contrary to the provisions
of the Act and must be rejected.
[64] It
is possible, as in Boehringer, for each claim in a patent to disclose a
separate invention. Where this issue is raised, however, individual patents
must be considered on a case-by-case basis. In my view, the approach Teva
advocates for at para. 119 of its factum is useful in this case: “. . . the
specification as a whole must be examined to determine whether sildenafil and
the other compounds claimed in the patent are linked so as to form a single
general inventive concept”. This is consistent with this Court’s comment in Consolboard,
at p. 520: “We must look to the whole of the disclosure and the claims to
ascertain the nature of the invention and methods of its performance....”
(iv) Virgin v Zodiac
[24]
On July 3, 2013, the United Kingdom Supreme
Court released its decision in Virgin Atlantic Airways Limited v Zodiac Seats UK
Limited [2013] UKSC 46 [Virgin Atlantic].
In that case, Zodiac Seats UK Limited (Zodiac) was held to have
infringed a patent for reclining airline seats held by Virgin Atlantic Airways
Ltd. (Virgin). This finding was upheld on appeal and leave to appeal to the
Supreme Court was refused. However, after Zodiac’s appeal rights expired but
before Virgin’s damages were assessed, the patent in suit was amended by the
European Patent Office (EPO) on the basis that it was invalid in its original
form. The effect of this amendment was that the patent that Zodiac was found to
have infringed was deemed to have never existed.
[25]
The issue before the UK Supreme Court was
whether, during the inquiry as to damages, Zodiac was entitled to contend that
there had been no damages because the patent was subsequently amended and
Zodiac’s seats did not infringe the amended patent. Both concurring judgments
held that Zodiac was permitted to rely on the subsequent amendment of the
patent (and the invalidity of the unamended patent) despite the fact that the
very argument that the EPO relied on to require the patent amendment had been
rejected in the UK proceedings.
[26]
The UK Supreme Court reasoned that, although
Zodiac was potentially bound by cause of action estoppel and/or issue estoppel
concerning the invalidity and infringement of the patent over the prior art,
and bound by a finding of abuse of process regarding other prior art that it
could potentially raise, it was not estopped from relying upon the fact that
the patent had been revoked, since that fact was not available at the time of
the first decision. Accordingly, the UK Supreme Court held that Zodiac was
entitled to rely upon the fact of the patent’s amendment in the EPO on the
damages inquiry.
[27]
As Lord Neuberger noted at para 52, it would be
fundamentally unfair to grant damages as if the unamended patent remained
valid:
Absent
special factors, principle, fairness and commercial sense support the view that
the fact that the patent in issue had been revoked was a point which the
alleged infringer should have been entitled to rely on in the assessment…to
deny the alleged infringer the ability to raise it would be to give effect to a
monopoly right which the patentee never should have had.
Motion to Amend
[28]
On January 30, 2014, Apotex filed the present
motion for leave to amend its Statement of Issues to argue that the same result
as in Virgin Atlantic should apply in the present case, as well as to
amend paragraph 26 to identify the provisions of the Competition Act
which Apotex alleges the Plaintiffs have breached. The proposed amendments are reproduced
below:
3. Hughes J.’s
conclusion that the ‘350 Patent was valid was based upon his application of a
principle or rule of law he understood to hold that separate claims in a patent
constitute separate inventions distinct from the inventive concept of the
patent as a whole.
4. The 350’
Patent issued from an application voluntarily divided out of the parent ‘340
application (“340 Application”). The ‘340 Application claimed the invention of
a large class of compounds that included enalpril, enalprilat and lisinopril,
each of which was asserted to be useful for the stated purpose of treating
hypertention. The ‘350 Patent claimed a smaller class of compounds selected
from the larger class in the ‘340 Application in claim 1, including lisinopril,
and specifically claimed lisinopril itself in claim 2.
5. Hughes J.
determined that there was nothing in the ‘340 Application to suggest that the
class of compounds claimed in the ‘350 Patent, including lisinopril,
constituted a separate invention distinct from the class claimed in that
application. Hughes J. concluded that the inventors of the ‘350 Patent had only
made a single invention that was directed to all the compounds claimed in the
‘340 Application.
6. However,
Hughes J. felt bound by judicial precedent to hold that the subject matter of
each of the claims of the ‘350 Patent constituted discrete inventions. But for
the principle or rule of law he felt bound to apply, Hughes J. would have found
that the subject matter of the ‘350 Patent did not constitute an invention
distinct from the invention of the class of compounds claimed in the parent
‘340 Application, and which comprised the subject matter of Canadian Letters
Patent Nos. 1,275,349, 1,300,313 and 1,308,313, all of which issued to the
Plaintiff, Merck & Co. Inc.
7. The Court
of Appeal upheld Hughes J. decision that each claim constituted a separate
invention and thus that the ‘350 Patent monopolized the specific class of
compounds it claimed including lisinopril, as a separate invention distinct
from the invention of the larger class of compounds claimed in the ‘340
Application.
…
10. During the
pendency of this phase of the action addressing the Deferred Issues, the
Supreme Court of Canada released its judgment in Teva Canada Ltd v Pfizer
Canada Inc (2012 SCC 60) (“Teva”). In Teva, the Supreme Court
of Canada determined that there is no rule of law which holds that separate
claims in a patent constitute separate inventions distinct from the inventive
concept of the patent as a whole. In reaching that conclusion, the Supreme
Court of Canada explicitly referred to the Liability Judgment, and
unequivocally rejected the principle that both Hughes J. and the Court of
Appeal had relied upon in concluding that the ‘350 Patent had been validly
issued.
11. As a consequence
of the Supreme Court of Canada’s decision in Teva, and the decision of
the UK Supreme Court in Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd 2013
UKSC 46 (“Virgin”), the legal and factual foundation of this enquiry
concerning the Deferred Issues no longer exists. In Virgin, the UK Supreme Court determined that where, subsequent to a finding of patent infringement but
prior to the rendering of a money judgment in respect thereof, the underlying
patent is invalidated, there is no basis to recover damages for infringement.
12. Apotex
states that the same result should apply in the within case. The inquiry in
respect of the Deferred Issues is premised on the existence of a validly issued
patent comprising an invention distinct from the invention of the entire class
of compounds claimed in the ‘340 Application. Apotex states as a fact that,
since the decision of the Supreme Court of Canada in Teva has determined
that the only basis for holding that the ‘350 Patent could have been lawfully
granted is wrong in the law, the Plaintiffs could not and did not suffer any
damage as a result of any activities of Apotex.
13. In the
alternative, any inquiry into the damages allegedly suffered by the Plaintiffs
must take into account the fact that the subsequent decision of the Supreme
Court in Teva has determined that the invention claimed in the ‘350
Patent could not form the subject matter of a separate patent at the time of
the alleged infringement. It is trite law that a patent that has been
determined to be invalid is void ab initio, and a patent that should not
have been granted cannot have been infringed. As a matter of law and equity,
the Plaintiffs should not be rewarded by any measure of damages that does not
take into account the fact that the patent in question could not have been
infringed when the activities of Apotex that form the basis of the Deferred
Issues inquiry were carried out.
…
26. Apotex
states that the Plaintiffs agreed whether tacitly or overtly, not to compete in
the Lisinopril market in Canada so as to maintain an artificial price for their
Lisinopril, in contravention of section 45, 47 and 61 of the Competition Act
in force at all material times. Accordingly, by reason of their
anti-competitive behaviour, they are each disentitled from claiming damages, or
in the alternative, are disentitled from claiming damages at the profit margin
calculated based on the selling prices maintained by the Plaintiffs.
Status of the Proceeding
[29]
At the time Apotex’s motion was brought, oral
and documentary discovery for the purpose of the reference on damages was
ongoing. Second round examinations for discovery were completed, however,
answers to undertakings given at these examinations had yet to be exchanged and
motions to compel questions refused or taken under advisement had yet to be
scheduled.
[30]
Over the course of the discovery process, the
claim being advanced by the Plaintiffs was particularized as follows:
(a) The lost profits that AstraZeneca Canada and Merck Canada would have earned on the sales of the additional lisinopril containing products;
(b) AstraZeneca U.K.’s lost profits on the sales of bulk
lisinopril and lisinopril tablet formulations to AstraZeneca Canada;
(c) AstraZeneca U.K.’s lost royalty income from the toll
manufacturing of bulk lisinopril by a subsidiary;
(d) The portion of additional dividends representing the lost
profits from additional sales of bulk lisinopril by Merck’s Irish manufacturing
facility to Merck Canada;
(e) The royalties Merck U.S. says would have been earned by a
subsidiary on the sales of Merck Canada’s Prinivil products, and AstraZeneca Canada’s Zestril products, from their respective “replacement” sales;
(f) The difference in the price Merck Canada would have
charged for its Prinil and Prinzide products but for the presence of Apotex’s
lower-priced infringing products (“price suppression”); and
(g) A reasonable royalty on Apotex’s exports of infringing
lisinopril formulations.
[31]
Although the Plaintiffs have not quantified
their respective claims for damages, it is expected to total several hundred
million dollars. Apotex disputes the Plaintiffs’ entitlement to, and the
alleged quantum of, the alleged heads of damages described above.
Principles
Governing Motions for Leave to Amend
[32]
The hearing of the Apotex’s motion consumed the
best part of two days. Much of the argument centered on the role and the limits
of the discretion of the Court on a motion for leave to amend under Rule 75 of
the Federal Courts Rules.
[33]
The parties agree that the basic principle of
amendment remains that set out in Canderel Ltd v Canada (1993), 1993
CanLII 2990 (FCA), [1994] 1 FC 3, 157 NR 380 (CA) [Canderel]. Leave to amend
should be allowed for the purpose of determining the real questions in
controversy between the parties, provided that it would serve the interests of
justice, and that allowing the amendment would not result in an injustice to
the other party not capable of being compensated by an award of costs.
[34]
It is also common ground between the parties
that an amendment must be refused if it would not survive a motion to strike. A
claim will only be struck if it is plain and obvious, assuming the facts
pleaded to be true, that the pleading discloses no reasonable cause of action: Odhavji
Estate v Woodhouse, 2003 SCC 69 (CanLII), 2003 SCC 69, [2003] 3 SC. 263, at
para 15; Hunt v Carey Canada Inc, 1990 CanLII 90 (SCC), [1990] 2
SCR 959, at p 980.
[35]
In R v Imperial Tobacco Canada Ltd, 2011
SCC 42 (CanLII), 2011 SCC 42 [Imperial Tobacco] at para 21, the Supreme
Court of Canada reminded lower courts that motions to strike should be a “tool
that must be used with care” in order to allow the law to naturally evolve. Apotex
submits that the same cautious approach should be taken by the Court when
dealing with a motion for leave to amend. According to Apotex, the case will
only be beyond doubt if the proposed amendment has no “possible prospects of
success” because it is “so incontestably bad” and “devoid of any merit” that it
does not advance an argument that is even worth considering. I disagree that
the bar should be set so low.
[36]
One of the Court’s functions is to act as
gatekeeper and to ensure that its resources are utilized fairly, with a view
towards judicial economy so that meritorious claims can be dealt with in an efficient
manner. This means adopting a robust approach to the striking of pleadings
which do not have a reasonable chance of success, as was reinforced by the
Supreme Court of Canada in Imperial Tobacco, at paras 19-20:
[19] The power to strike out claims that have no reasonable
prospect of success is a valuable housekeeping measure essential to effective
and fair litigation. It unclutters the proceedings, weeding out the hopeless
claims and ensuring that those that have some chance of success go on to trial.
[20] This
promotes two goods -- efficiency in the conduct of the litigation and correct
results. Striking out claims that have no reasonable prospect of success
promotes litigation efficiency, reducing time and cost. The litigants can focus
on serious claims, without devoting days and sometimes weeks of evidence and
argument to claims that are in any event hopeless. The same applies to judges
and juries, whose attention is focused where it should be -- on claims that
have a reasonable chance of success… .
[37]
This trend towards simplifying proceedings as
soon as it is reasonable and fair was reiterated by the Supreme Court of Canada
in Hryniak v Mauldin, 2014 SCC 7, a summary judgment case calling for “a culture shift...in order to create an environment promoting
timely and affordable access to the civil justice system...moving the emphasis
away from the conventional trial in favour of proportional procedures tailored
to the needs of the particular case.” Striking pleadings or denying
amendments that have no reasonable prospect of success is consistent with this
new culture.
[38]
In determining whether a novel claim has a
“reasonable prospect” of success, many factors must be examined. The clarity of
the factual pleadings is important, as well as the existence of case law
discussing the same or similar causes of action is relevant. The courts must be
careful not to inhibit the development of the common law by applying too strict
a test to novel claims. However, as was stated by the Alberta Court of Appeal
in O’Connor Associates Environmental Inc v MEC OP LLC, 2014 ABCA 140: “the courts must resist the temptation to send every case to
trial, even if some legal analysis is needed to determine if a claim has any
reasonable prospect of success…”. The courts accordingly have a duty to carefully
assess the reasonableness or viability of a plea and separate the wheat from
the chaff.
[39]
Pleadings may also be struck on the basis of
other enumerated grounds under subsection 221(1) of the Federal Courts
Rules. These include pleadings that would prejudice and delay the fair
trial of the action. The same considerations apply to proposed amendments.
ANALYSIS
[40]
It is axiomatic that the onus on a motion for
leave to amend remains on the moving party to persuade the Court that there is
a “reasonable prospect” that the claim or defence will succeed.
[41]
According to Apotex, the Supreme Court of Canada
in Teva rejected the alleged rule of law applied by Mr. Justice Hughes
in the Liability Judgment and upheld by the Federal Court of Appeal, holding
that it would be contrary to the scheme of the Patent Act. In its
proposed amended Statement of Issues, Apotex seeks to plead facts that it
claims are relevant to the assessment of the Plaintiffs’ damages. Apotex
maintains that its pleading is consistent with the UK Supreme Court’s recent
decision in Virgin Atlantic where the
defendant was permitted to raise the revocation of the patent in answer to the
damages assessment notwithstanding that the patent had been found to be valid
and infringed.
[42]
Apotex submits that it should be permitted to
assert that the same result as in Virgin Atlantic should
apply in this case. The fact that the Supreme Court of Canada specifically
rejected the legal foundation of the Liability Judgment that the ‘350 Patent
was properly issued goes to the frailties of the ‘350 Patent and is said to be
relevant to any assessment of what the Plaintiffs actually lost as a result of
the infringement found at trial.
[43]
Apotex seeks leave to argue before the Referee that
the legal conclusion of the Supreme Court of Canada in Teva should be a
factor considered in quantifying the Plaintiff’s claim for damages. Apotex
wishes to assert that, in fixing a just and appropriate award, it would be
improper for the Referee not to take into account all the circumstances with
regard to the ‘350 Patent. Apotex submits that the key principle in Virgin
Atlantic is that a court tasked with assessing damages should not blind
itself to subsequent events relevant to the patent at issue and should instead
consider all relevant circumstances to avoid an absurd result.
[44]
No matter how Apotex couches its argument, the
essence of the proposed amendments constitutes a collateral attack on Mr. Justice
Hughes’ ruling that the ‘350 Patent is valid and infringed by Apotex. The issue
of the patent’s validity has been finally adjudicated in the Plaintiff’s
favour. By the proposed amendments, Apotex seeks to do an end run around the
Liability Judgment, which was appealed unsuccessfully all the way to the
Supreme Court of Canada.
[45]
Both res judicata (also known as estoppel
by res judicata or cause of action estoppel) and issue estoppel prevent
Apotex from re-opening the question of the validity of the ‘350 Patent as the
same question was finally determined as between the parties: Danyluk v Ainsworth
Technologies Inc [2001] 2 S.C.R. 460 at 489-90.
[46]
The law as to res judicata
is well stated by Middleton J.A. of the Ontario Court of Appeal in McIntosh
v Parent [1924] 4 DLR 420, at p 422:
“When a question is litigated, the judgment of the Court is a final
determination as between the parties and their privies. Any right,
question, or fact distinctly put in issue and directly determined by a Court of
competent jurisdiction as a ground of recovery, or as an answer to a claim set
up, cannot be re-tried in a subsequent suit between the same parties or their
privies, though for a different cause of action. The right, question, or
fact, once determined, must, as between them, be taken to be conclusively
established so long as the judgment remains.
[47]
The doctrine of issue estoppel has consistently
been applied by the courts, including in Virgin Atlantic, at para 27:
If this case is to be determined according to these general
principles of the modern law, there can, I think, be little doubt about the
answer. The Court of Appeal decided, before the result of the opposition
proceedings in the EPO, that in its unamended form the patent was valid and
infringed. It follows that Zodiac are estopped from asserting on the enquiry as
to damages that in its unamended form the patent was invalid or was not
infringed. This estoppel is a true cause of action estoppel. The Court of
Appeal has determined in favour of Virgin issues essential to the existence of
the cause of action for infringement of the unamended patent, which are the
basis of the claim for damages.
[48]
The same reasoning would apply in the present
case. All questions of fact, law and mixed fact and law from the decision of Mr.
Justice Hughes, as affirmed by the Federal Court of Appeal, are res judicata
and Apotex is estopped from asserting otherwise.
[49]
I agree with the Plaintiffs that whether the
Supreme Court subsequently changed the law upon which the Liability Judgment
was based is irrelevant. A change in the law is not a sufficient basis to
re-open previously decided cases: Regie des rentes du Quebec v Canada Bread
Company Ltd, 2013 SCC 46 at para 55, AB Hassle v Apotex Inc, 2008 FC
184 at paras 39-40, aff’d 2008 FCA 416, Metro Can Construction Ltd v
Canada, 2001 FCA 227 at paras 4-5.
[50]
Special circumstances may operate to restrict
the application of the issue estoppel rule, and allow a party to re-litigate
what would, absent those special circumstances, be estopped: Apotex Inc v
Merck & Co, 2002 FCA 210 at para 29. However, no special circumstances
have been pleaded by Apotex in its proposed amendments.
[51]
Apotex places great reliance on Virgin Atlantic.
The decision is based, however, on a peculiar aspect of European patent law
which has no parallel in Canada.
[52]
The United Kingdom is subject to a unique patent
regime where two independent bodies, the English Courts and the EPO, both have
jurisdiction over European patents. Virgin sued Zodiac in the UK for infringing its European patent for airplane seats. The English Court of Appeal held the
patent valid and infringed. The Technical Board of Appeal (TBA) of the EPO, a
body independent of the United Kingdom Courts but having parallel jurisdiction
over European patents, which also apply in the UK, subsequently ruled that the
same patent was invalid in rem and amended it, also with in rem
and retrospective effect.
[53]
The UK Supreme Court concluded that there were
two related reasons why Zodiac could not be precluded from relying on the
decision of the TBA on the enquiry as to damages. One was that Zodiac was
relying on the more limited terms of a different patent which, by virtue of the
decision of the TBA, had to be treated at the time of the enquiry as the only
one that has ever existed. The other was that Zodiac was not seeking to reopen
the question of validity determined by the Court of Appeal. Zodiac was relying
on the mere fact of amendment, not on the reasons why it happened. Because the
EPO had jurisdiction to amend the patent with retrospective effect, the
amendment was a new fact, which the English Court was obliged to recognize. Nothing
in Virgin Atlantic affects Canadian patent law or the doctrine of res
judicata.
[54]
Apotex suggests that, in light of the Teva
decision, Mr. Justice Hughes would have ruled that the ‘350 Patent is invalid
as an improper divisional. However, such a result is speculation, at best. Mr. Justice
Hughes ruled that even if the ‘350 Patent had been improperly divided from the
parent ‘340 application, this was not a ground of invalidity. Nothing in Teva
changes the law on divisional patents and nothing in Teva affects the
validity of the ‘350 Patent or the liability of Apotex for its infringement.
[55]
Try as it might, Apotex cannot escape the fact
that it is bound by the Liability Judgment. The only issue remaining to be
determined in the present proceeding is the quantum of damages which Apotex
must pay because of its violation of the Plaintiffs’ intellectual property
rights.
[56]
The Referee’s mandate is to assess the quantum
of damages owing on the basis that the ‘350 Patent is valid and has been
infringed as has been finally determined by this Court. The Referee has no
authority to decide otherwise as the scope of a Reference is strictly limited
by the terms of the referring order: Society of Composers, Authors &
Music Publishers of Canada v 960122 Ontario Ltd, 2003 FCA 256 at paras 21-22.
Moreover, the Referee may not vary or broaden the terms of the Reference as
delineated by the referring court.
[57]
Even if it were open to Apotex to now seek a
declaration regarding the validity of the ‘350 Patent, a damages reference is
not the appropriate forum to do so. To allow such issues to be raised at this
time would essentially convert the Reference into a reconsideration of the
matters that have been finally adjudicated as between the parties.
[58]
For the above reasons, the proposed amendments
should not be allowed on the grounds that they constitute an improper
collateral attack of the Liability Judgment, including the validity of the ‘350
Patent and the Plaintiffs’ entitlement to damages. It is plain and obvious that
Apotex’s proposed amendments disclose no issue that is relevant to determining
the quantum of damages. Alternatively, the Referee has no jurisdiction to
entertain such questions.
[59]
The additional proposed amendments to allege a
criminal violation of the Competition Act must suffer the same fate, but
for different reasons.
[60]
Apotex seeks a declaration from the Referee that
the Plaintiffs have acted “in contravention of subsection 45, 47 and 61 of the Competition
Act”. Apotex is effectively seeking a declaration from the Referee that the
Plaintiffs have engaged in price-fixing (section 45) and bid-rigging (section
47). Apotex submits that the Plaintiffs’ contravention of the Competition
Act is a factor to be considered in assessing the Plaintiffs’ damages. I
disagree.
[61]
The fact that the Plaintiffs did not move to
strike the allegations of anti-competitive behaviour as they presently stand in
Apotex’s Statement of Issues does assist Apotex. The onus remains on Apotex to
establish that it is just and appropriate to amend the allegations.
[62]
I agree with and adopt the objections raised by
the Plaintiffs at paras 70 to 74 of their Outline of Argument filed on April 3,
2014. Beyond the fact that the plea is deficient, the claim appears to be statute-barred.
In any event, whether there has been a violation of the Competition Act
requires the determination of a legal question which ought properly be brought by
way of action under section 36 of the Act. The allegations certainly cannot
be grafted onto a damages reference.
[63]
I should also add that no explanation has been
provided why Apotex is seeking to make such serious allegations against the
Plaintiffs at this late stage of the proceeding. If the amendments were
allowed, discoveries would have to be re-opened, with the attendant delays,
which may place the hearing dates of the reference in jeopardy. Any further
delay in this 18 year old case would work a serious prejudice to the
Plaintiffs.
[64]
In the circumstances, I do not consider it in
the interests of justice to grant leave to amend paragraph 26 of the Statement
of Issues.
CONCLUSION
[65]
For the above reasons, I conclude that leave to
amend Apotex’s Responding Statement of Issues should be denied.
[66]
Finally, at the conclusion of the hearing,
counsel agreed that costs fixed in the amount of $5,000.00 should be awarded to
any party that was entirely successful on the motion. In the circumstances,
costs shall be granted to the Plaintiffs.
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