Docket: T-1805-12
Citation: 2013 FC
1254
Ottawa, Ontario, December 16, 2013
PRESENT: The Honourable Mr. Justice Zinn
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BETWEEN:
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VALEANT CANADA LP /
VALEANT CANADA S.E.C. and
VALEANT INTERNATIONAL BERMUDA
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Applicants
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and
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THE MINISTER OF HEALTH and
COBALT PHARMACEUTICALS COMPANY
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Respondents
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REASONS FOR ORDER AND ORDER
[1]
Cobalt Pharmaceuticals Company [Cobalt],
pursuant to paragraph 6(5)(b) of the Patented Medicines (Notice of
Compliance) Regulations, SOR/93-133 [Regulations],
moves to dismiss, as an abuse of process, part of the application by Valeant
Canada LP/Valeant Canada S.E.C. and Valeant International Bermuda [Valeant] requesting
an order prohibiting the Minister from issuing a Notice of Compliance [NOC]
under subsection 6(1) of the Regulations.
[2]
The underlying application relates to two
patents: Canadian Patent No. 2,242,224 [the ‘224 Patent], and Canadian Patent
No. 2,307,547 [the ‘547 Patent]. This motion deals only with the ‘224 Patent.
For the reasons that follow, I find that Valeant’s application is not an abuse
of process.
Background
The ‘224 Patent
[3]
The ‘224 Patent deals with formulations and manufacturing processes for
the cardiovascular drug, diltiazem. The purpose of the formulations covered by
the ‘224 Patent was to eliminate a “food effect” problem with previous
sustained release formulations. This was done by adding a surfactant.
[4]
The ‘224 Patent, which is entitled “Sustained-Release
Microgranules Containing Diltiazem as the Active Principle,” was issued
on January 13, 2004, and expires on December 23, 2016. The patent has three
independent claims: 1, 35, and 36.
[5]
The construction of claim 1 is not disputed. It specifies that the
surfactant be located in the active layer. The construction of claims 35 and
36, and specifically whether they require that the surfactant be located in the
active layer, is disputed.
The Previous
Decision Interpreting the ‘224 Patent
[6]
In 2005, Biovail Corporation [Biovail], the
corporate predecessor to Valeant, was the applicant in a NOC proceeding brought
against Rhoxalpharma Inc. [Rhoxal]. The pharmaceutical product at issue was an
extended release formulation of diltiazem hydrochloride, trade-name Tiazac,
manufactured and sold in Canada by Biovail as the exclusive licensee under the ‘224
Patent.
[7]
In Biovail Corp v Canada, 2005 FC 1424,
44 CPR (4th) 404 [Biovail], the main issue was whether the precise location
of the surfactant was an essential element of claims 35 and 36 of the ‘224 Patent
when properly construed. Specifically, did those claims require that the
surfactant be located within the active layer of the formulation? Justice Noël construed claims 35 and 36 of the ‘224 Patent as requiring that
the surfactant be located in the active layer. He determined
that the active layer of the Rhoxal capsule did not contain a
surfactant. Accordingly, he found that Biovail had not established that Rhoxal’s allegation of non-infringement in its Notice of Allegation
[NOA] was not justified, and accordingly, Biovail’s NOC application was
dismissed.
[8]
Biovail appealed to the Federal Court of Appeal
arguing, in part, that Justice Noël “erred in law in his construction of the
‘224 Patent, particularly claims 35 and 36, by reference to the disclosure and
the examples, to narrow the scope of those claims.” Biovail’s appeal was
dismissed by the Court of Appeal as moot because the NOC had issued: Biovail
Corp v Canada (Minister of Health), 2006 FCA 92, 46 CPR (4th) 413. No
action for infringement was launched by Biovail.
The Current Underlying
Application
[9]
In August 2012, Cobalt served its NOA in respect
of its tablets, Tiazac XC, alleging non-infringement and invalidity of the ‘224
and ‘547 patents. Valeant brought an application under subsection 6(1) of the Regulations
in response, seeking to prevent the Minister from issuing a NOC to Cobalt.
The Current Proceeding
[10]
Valeant submits that claims 35 and 36 should be read broadly such that
the invention instructs incorporating a surfactant in either the active
layer or the sustained release layer. Valeant claims that the
surfactant helps to release the diltiazem, that it can perform this function
from either layer, and that the location of the surfactant is not an essential
part of the claim.
[11]
Cobalt claims, and this Court found in Biovail, that the
invention is narrow and requires that the surfactant be in the active layer. Cobalt
says that because its formulation has the surfactant in the sustained release
layer, its formulation does not infringe the ‘224 Patent.
Position of the Parties
Cobalt
[12]
Cobalt submits that this is relitigation vis-à-vis the ‘224
Patent; that this is not an exceptional situation calling for relitigation;
that once a specific allegation of patent invalidity has been found to be
justified in the NOC context, the issue cannot be relitigated in respect of the
same patent and the same allegation; that Justice Noël’s decision on the
interpretation of the ‘224 Patent was correct; and that if the construction of
the ‘224 Patent in Biovail is applied to this application, Cobalt’s Tiazac XC formulation does not infringe the ‘224 Patent because it
does not contain surfactant in the active layer.
Valeant
[13]
Valeant submits that Cobalt has not met the threshold test of
“could not possibly succeed” to strike out part of its application; that
motions to strike in NOC proceedings are exceptional; that no determination has
been made as to whether Cobalt’s product infringes; that even if Justice Noël’s construction of the patent is
accepted on this application, that alone does not determine the issue of
whether Cobalt’s NOA is sufficient because the Court must still determine if,
under Justice Noël’s construction of the patent,
Cobalt’s product is infringing; that judicial comity will not
necessarily be undermined by permitting the application to proceed as presently
constituted; that the decision of Justice Noël, while persuasive and deserving of considerable weight, is not
binding; and lastly, that for policy reasons, paragraph 6(5)(b) of the Regulations
does not apply because this is not a case of an innovator repeatedly litigating
the same patent in respect of a number of generics, as was the situation in the
series of olanzapine cases; rather this is only the second application related
to the ‘224 Patent, and it comes more than eight years after the first.
The Law
[14]
The relevant provision under the Regulations for
a motion to strike is paragraph 6(5)(b):
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Subject to subsection (5.1), in a proceeding
in respect of an application under subsection (1), the court may, on the
motion of a second person, dismiss the application in whole or in part
…
(b) on the ground that it is
redundant, scandalous, frivolous or vexatious or is otherwise an abuse of
process in respect of one or more patents.
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Sous
réserve du paragraphe (5.1), lors de l’instance relative à la demande visée
au paragraphe (1), le tribunal peut, sur requête de la seconde personne,
rejeter tout ou partie de la demande si, selon le cas:
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b) il conclut qu’elle est inutile, scandaleuse, frivole ou vexatoire
ou constitue autrement, à l’égard d’un ou plusieurs brevets, un abus de
procédure.
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[15]
Many cases have determined that on a motion to
strike under paragraph 6(5)(b) of the Regulations, the moving party must
show that the proceeding "is so clearly futile that it has not the
slightest chance of succeeding" which is the test Valeant encourages the
Court to adopt. It further submits that this form of early relief is
exceptional and it will be denied in the presence of a debatable issue of fact
or law (see for example, Eli Lilly Canada Inc v Novopharm Ltd, 2009 FC
675, 80 CPR (4th) 391).
[16]
Justice de Montigny noted in Pfizer Canada Inc v Apotex Inc, 2009
FC 671, [2009] FCJ No 1390 at para 33 that:
[T]he moving party,
bears the entire burden of proof in a motion brought pursuant to paragraph 6(5)(b)
of the Regulations. It is well established that a moving party must
show that it is "plain and obvious" that the application discloses no
reasonable cause of action and is "so clearly futile" that it does
not have the slightest chance of success. This is clearly a very high onus
(reference omitted).
It was further
held at para 34 that any doubt as to whether the moving party has met its
burden must be resolved in favour of the responding party.
[17]
It appears, however, that the standard for finding an abuse of process
has been relaxed slightly, and the situations which may be classified as abuses
of process have been extended by the Supreme Court of Canada in Toronto
(City) v CUPE Local 79, 2003 SCC 63, [2003] 3 S.C.R. 77 [CUPE]. This
was specifically noted by the Court of Appeal in Sanofi-Aventis
Canada Inc v Novopharm Ltd, 2007 FCA 163, [2008] 1
FCR 174 at para 36 [Sanofi]:
Proceedings in which
the case for the patent holder is clearly futile or plainly has no chance of
success because of an earlier, binding authority continue to be impermissible
as abuses of process because such proceedings will waste judicial resources and
impose hardship on generic drug manufacturers without any corresponding benefit
such as a more accurate result. However, applying the principles outlined by
Arbour J. [in CUPE], it is evident that the types of proceedings that
constitute abuses of process go beyond those that are clearly futile to
include cases such as the one at present. (emphasis added)
[18]
Accordingly, where it is asserted under paragraph 6(5)(b) of the Regulations
that an application should be dismissed in whole or part as an abuse of
process, it is not strictly required that the moving party establish that the
application, or that part which is challenged, is so clearly
futile that it has not the slightest chance of succeeding.
[19]
In Sanofi, Novopharm Ltd. [Novopharm] (the second generic
company), brought a motion to strike the application of Sanofi-Aventis Canada
Inc. [Sanofi-Aventis] (the innovator), under paragraph 6(5)(b) of the Regulations.
The Federal Court and Federal Court of Appeal both held that Novopharm’s NOA
was substantially similar to that submitted by Apotex Inc. [Apotex] (the first
generic company), in an earlier NOC proceeding where it was determined that the
patent was invalid because there was no basis for Sanofi-Aventis to soundly
predict the utility of the invention. Both Courts acknowledged that
Novopharm’s NOA was “longer, more detailed and more specific” than Apotex’s, but
also found that both NOAs contained the same “allegations that were critical”
to the Federal Court’s findings of invalidity in the Apotex proceedings.
Despite the fact that Sanofi-Aventis sought to lead additional evidence that,
in its view, would prove that it had a basis for sound prediction of utility,
the Federal Court of Appeal upheld the dismissal of the application as an abuse
of process.
[20]
In the view of the Federal Court of Appeal,
relitigating the issue of sound prediction was an abuse of process and would be
contrary to the purpose of paragraph 6(5)(b) of the Regulations
which is to promote fairness and reduce unnecessary litigation. The Court
acknowledged that the previous decision was not determinative of that before
it, and also that it was not plain and obvious that the application would fail
as a result of the earlier proceeding, but held that it was not necessary to
establish that the issue was clearly futile in order to be considered an abuse
of process. In the view of the Court, proceeding in the face of the earlier
decision would offend the principle considerations set out by the Supreme Court
in CUPE: Judicial economy, consistency, finality, and
the integrity of the administration of justice.
[21]
In addition to Sanofi, Cobalt also relies on Hoffmann-La
Roche Ltd v Canada (Minister of National Health & Welfare), (1998), 85
CPR (3d) 50, 158 FTR 135 [Hoffmann-La Roche]. There, Justice Rothstein,
as he then was, dismissed the NOC application
finding it to be an abuse of process. At paragraph 14 of his Reasons,
Rothstein J. remarked as follows:
In view of the prior decisions involving Nu-Pharm and Apotex and the fact
that the evidence filed by the applicants in this application adds nothing new
to assist in the construction of the relevant words of the patent, the issue in
this litigation is the exact same issue as in the Nu-Pharm and Apotex cases.
The applicants for prohibition are the same, the patent at issue is the same,
and the notice of allegations are virtually identical. This litigation is an
abuse of the process in that it attempts to retry the same issue which has
already been determined in three separate proceedings against the applicants.
(emphasis added)
Analysis
[22]
While the statements of principle in both Sanofi
and in Hoffmann-La Roche are instructive, neither is on all-fours
with this application. Unlike Sanofi, the present application turns on an
issue of law not of fact. Unlike Hoffman-La Roche the patent has not
previously been interpreted within a span of two years in two separate NOC
proceedings and by the Court of Appeal; it has had but one previous
interpretation more than eight years previous.
Is the present
application an abuse of process?
[23]
Having turned my mind to the considerations of
judicial economy, consistency, finality, and the integrity of the
administration of justice, I have concluded that the present application, as
constituted, is not an abuse of process.
[24]
First, there is little or no impact on judicial
economy if the application proceeds. Unlike all of the other precedents put to
the Court, this application must be heard whether it is restricted to one
patent or includes both. There is no suggestion from Cobalt that the Court’s
time and resources will be materially lessened if its motion is granted.
[25]
Second, the blind application of the principle
of consistency should not and cannot override fairness. As was noted by the
Court of Appeal at paragraph 40 of Sanofi, “it is important in each case
to ensure the application of the doctrine of abuse of process does not give
rise to unfairness in the circumstances.”
[26]
The principle of consistency, in many respects,
is akin to that which underlies judicial comity - a prior decision ought to be
followed by a judge of concurrent jurisdiction unless persuaded that the
decision is clearly wrong or that the interests of justice require the Court to
do so. However, there is a difference. It is not appropriate, in a motion to
dismiss part of an application as an abuse of process, to conduct a
full-fledged assessment of the previous decision to determine whether an
exception to judicial comity is warranted - that is a matter for the
applications judge. More appropriate, in my view, is to assess the argument
the responding party wishes to advance which, if it succeeds, would result in
an inconsistent finding. The motions judge should determine whether, given the
principle of judicial comity, the argument has more than a mere possibility of
success. In my view, this appropriately sets the bar higher than “not clearly
futile,” while not requiring the responding party to discharge the higher
burden of showing that their argument has a “reasonable likelihood of success.”
[27]
In the application before the Court, Valeant
acknowledges that the principle of judicial comity will result in it facing a
significant hurdle in persuading another judge of this Court that the
interpretation of the claims made by Justice Noël was wrong. Valeant argues
that Justice Noël failed to consider three “critical and binding authorities on
the principles of patent construction:” Dableh v Ontario Hydro, [1996]
3 FC 751 (CA), [1996] FCJ No 767; Free World Trust v Électro Santé Inc, 2000
SCC 66, [2000] 2 S.C.R. 1024; and Whirlpool Corp v Camco Inc, 2000 SCC 67, [2000]
2 SCR 1067. Its submission is that Justice Noël, contrary to these
authorities, construed the claims with an eye on the issue of infringement, and
that he narrowed the scope of the unambiguous language of the claims by
referring to the specification and, in particular, to the examples therein.
[28]
In Biovail, Justice Noël found, and it
was not disputed by the parties, that claim 1 of the ‘224 Patent explicitly
required that the surfactant be located in the active layer. He also acknowledged
that claims 35 and 36 “do not specify the location of the surfactant” and that
“[c]laims 35 and 36 of the ‘224 Patent cannot be treated in the same way as
Claim 1.” He said that the question was “whether the ‘224 Patent covers the
use of surfactants located anywhere in the [sustained release] layer or only in
the active layer.” Valeant submits that Justice Noël’s job was done after he
interpreted claims 35 and 36 as requiring a surfactant as an essential element
of the invention and after he noted that these claims, unlike claim 1, did not
specify that the surfactant was to be in the active layer. It submits that he
improperly narrowed these claims by requiring that the surfactant be located in
the active layer when no such specific location was described in these claims.
Valeant submits that where there is no ambiguity in the plain language of the
words, the Court cannot look to the specification; the ordinary meaning of the
words governs. Here, there was no ambiguity because the location of the
surfactant was intentionally omitted from claims 35 and 36.
[29]
Valeant’s submission in this application as to
the proper interpretation of the ‘224 Patent rests not on new or better
evidence (as in Sanofi) or flies in the face of a previous and binding
determination of the proper interpretation by the Court of Appeal (as in Hoffmann-La
Roche). While Valeant may ultimately not succeed in that submission, in my
view, despite the principle of judicial comity, its argument has more than a
mere possibility of success. Accordingly, fairness in permitting it an
opportunity to prove its case overcomes consistency.
[30]
The principle of finality, in my view, has less
application to the facts at hand than in the cases relied upon by Cobalt.
There has been no review of the patent interpretation given by Justice Noël by
the Court of Appeal, as there was in Hoffmann-La Roche, nor have there
been a number of previous identical judicial determinations. Here, unlike Sanofi,
Valeant did not fail to put its best case forward in the first instance; rather
it is a situation where it is alleged that an error of law was made. It is
noteworthy in this respect, that Biovail attempted to appeal to the Federal
Court of Appeal, but its appeal was dismissed as moot. The Federal Court of
Appeal has repeatedly held that “once an NOC has been issued, a patent holder's
appeal from an application to prohibit the issuance of an NOC will be dismissed
due to mootness:” Eli Lilly Canada Inc v Novopharm Limited, 2007 FCA
359, 62 CPR (4th) 161 at para 3.
[31]
Cobalt submits that the present proceeding is
akin to a collateral attack on the earlier decision of Justice Noël and if Valeant
wished to challenge his interpretation, it ought to have launched an
infringement action after the NOC issued following his judgment in Biovail. It
should not be permitted to do so in a subsequent NOC proceeding. Cobalt notes
that the jurisprudence of the Federal Court of Appeal supports that the construction
of the claims of a patent in NOC proceedings is not binding on a trial judge in
an infringement action: Pharmacia Inc v Canada (Minister of National Health
and Welfare) (1994), [1995] 1 FC 588, 58 CPR (3d) 209; Novartis AG v
Apotex Inc, 2002 FCA 440, [2002] FCJ No 1551; Pfizer Canada Inc et al v
Apotex Inc et al (2001), 11 CPR (4th) 245, [2001] FCJ No 17.
[32]
Must a patentee be required to institute an
infringement action or be forever foreclosed from advancing another
interpretation of the claims of the patent in a future NOC proceeding? I fail
to see any principled reason for adopting such a draconian position.
[33]
There are a number of reasons why a patentee,
having lost an NOC proceeding to a generic, may decide not to sue for
infringement. The parties may have arrived at some mutually satisfactory
settlement of their dispute. To require the patentee to institute infringement
litigation or be forever bound by an interpretation of its patent that, on a reasoned
basis, it views as incorrect, would be a disincentive to parties resolving
their differences.
[34]
Another situation where the patentee may choose
not to launch an expensive infringement suit is where it is close to
introducing a new product such that the generic’s product will be overtaken in
the market and the financial loss will be slight. The ability of the generic
to capture market share might be undermined. The introduction of extended release
versions of pharmaceuticals is such a situation. To effectively force a
patentee to launch infringement litigation in such circumstances would indeed
be a waste of judicial resources, particularly when one compares the few days
scheduled for an NOC proceeding to the many weeks normally scheduled for an
infringement action. This would provide a perverse incentive to initiate
complex litigation if for no other reason than to be abundantly cautious and
avoid being bound by a particular construction of the patent indefinitely in
the future.
[35]
Therefore, I find that the failure of Biovail or
Valeant to institute infringement proceedings against Rhoxal is not fatal to or
even relevant to its position on this motion.
[36]
For all of these reasons, I do not find the
present situation to be one where Valeant is engaging in an abuse of process.
However, even if I were to have found an abuse of process, I would have exercised
my discretion and permitted Valeant to raise the issue of the proper legal
interpretation of the ‘224 Patent in this proceeding.
[37]
Dismissing all or a part of an application as an
abuse of process is a discretionary remedy. The Federal Court of Appeal in AB
Hassle v Apotex Inc, 2006 FCA 51, [2006] 4 FCR 513 at para 25 [AB Hassle],
has confirmed that even if it is found that a litigant is abusing the Court’s
process in an application under the Regulations, the Court has
discretion to allow the matter to be decided on its merits:
Even if it is
determined that a second or subsequent notice of allegation is an abuse of
process, the Federal Court nevertheless has the discretion to determine the
application for a prohibition order on its merits.
[38]
I would have exercised my discretion to allow
this application to be heard on its merits with respect to both of the patents
at issue primarily for three reasons. First, to do otherwise will result in
little or no savings of judicial resources. Any additional resources the
parties may have to employ is a matter that may be compensated for in costs.
Second, I am satisfied, even considering judicial comity, that the position
Valeant advances as to the interpretation of the ‘224 Patent has more than a
mere possibility of success. To deny it an opportunity to present its case
would be unfair. Third, as much of the jurisprudence under the Regulations
has held, motions to strike and summary judgments under the Regulations should
be rare and not encouraged: AB Hassle at para 2. NOC proceedings under
the Regulations are “summary proceedings, intended to facilitate a
relatively quick determination by the Federal Court of certain issues of patent
construction, infringement and validity:” AB Hassle at para 2. Cobalt correctly
acknowledges as much in its Written Representations. To encourage motions to
strike under the Regulations would undermine the expediency of such
proceedings. Therefore, the principles of abuse of process must be carefully
applied with a view to the unique nature of proceedings under the Regulations.
[39]
For these reasons the motion is dismissed. In
its Notice of Motion, Cobalt requested an extension of 30 (thirty) days from
the date of this Order to serve its evidence in the application. However, in
its Supplementary Memorandum it states that it “was compelled to proceed with
filing its evidence.” Accordingly, it appears that no such extension, as
initially requested, is required. Should it be otherwise, the parties may
address that issue with the case management Prothonotary.
[40]
Costs of this motion are awarded to Valeant.
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