Date: 20111219
Dockets: A-9-11
A-11-11
Citation: 2011 FCA 363
CORAM: EVANS
J.A.
GAUTHIER J.A.
STRATAS
J.A.
A-9-11
BETWEEN:
APOTEX INC.
Appellant
and
MERCK & CO. INC. and
MERCK FROSST CANADA LTD.
Respondents
APOTEX FERMENTATION INC.
Respondent
A-11-11
BETWEEN:
APOTEX FERMENTATION INC.
Appellant
and
MERCK & CO. INC. and
MERCK FROSST CANADA LTD.
Respondents
APOTEX INC.
Respondent
REASONS FOR JUDGMENT
GAUTHIER J.A.
[1]
These
appeals are from a judgment of Justice Snider of the Federal Court who found
that Apotex Inc. (Apotex) and Apotex Fermentation Inc. (AFI) had infringed
Merck & Co. Inc.’s (Merck) Canadian Patent Number 1,161,380 (the ‘380
Patent).
[2]
This
patent, which expired in 2001, covered a method for making lovastatin using a
microorganism of the genus Aspergillus terreus (AFI-1). More
specifically, the judge found that the appellants were liable for damages with
respect to the Apo-lovastatin products made from the first commercial batch
produced in Canada by AFI (batch CR0157) and from the 294 batches of lovastatin
produced by Blue Treasure (BT) in China
after March 1998.
[3]
The
judge’s reasons (2010 FC 1265) are detailed and comprehensive (226 pages). It
is clear that she had a firm grasp of the voluminous and complex evidence
presented to her during the 35-day trial where she also dealt with Apotex’ own
action against Merck pursuant to section 8 of the Patented Medicine (Notice
of Compliance) Regulations, SOR/93-133 as amended in SOR/98-166.
[4]
The judge
based her conclusion that the process used to produce AFI batch CR0157 was infringing
on the expert evidence of Dr. Davis. She found that his test results, which
indicated that the Apo-lovastatin tablets made from this batch contained AFI-1
DNA, were reliable and credible. She expressly rejected Apotex’ experts’ theory
of contamination (paragraph 454).
[5]
With
respect to the 294 batches of lovastatin produced in China by BT, she considered, under the general
title
“Infringement – the Circumstantial Case”, the six points enumerated at
paragraph 209 of her reasons. The judge indicated that she was persuaded that:
a. The documents
presented as BT batch records were not business records and were not reliable
and trustworthy evidence of the use of AFI-4 (C. fuckelii microbe used in
another method then recently patented by Apotex), because they had been fabricated
at least with respect to “any information that could identify the strain
of [microbe] used” [emphasis added] (paragraph 242).
b. The evidence
before her established that BT had enough of the media ingredient referred to
as Polyglycol P-2000 (P-2000) to carry out the AFI-1 process. However, on the
assumption that there was no further evidence available in that respect, there
was insufficient evidence to establish that BT had a quantity of P-2000
sufficient to carry out the non-infringing AFI-4 process which required 10-20
times more of this ingredient.
c. BT had a financial
motivation not to use the non-infringing process. It had the means to produce lovastatin
with the infringing AFI-1 process and the opportunity to use that process as
soon as Dr. Jerry Su, an AFI representative, left China at the end
of October 1997.
d. Mr. Luo, the
Deputy Plant Manager at BT, lied in two articles published in 2000 and 2002 and
fabricated his testimony to cover up the use of the AFI-1 process at a time
when BT was supposed to be using only the AFI-4 process. His behaviour supports
Merck’s contention that BT was using the AFI-1 process at least at the time
when BT made the experiments referred to in the above-mentioned articles
(paragraphs 327 and 335).
[6]
Apotex and
AFI make particular submissions concerning these findings. I deal with these
submissions below. For present purposes, I find that each of these findings is
supported by the evidence before the judge and was open to her to make.
[7]
In
addition, the judge made conditional findings responding to Merck’s alternative
arguments made in the event that a reviewing court found the BT batch records to
be reliable evidence. The alternative nature of these arguments appears clearly
from paragraph 244 of her reasons. It is not unusual in long and complex cases
such as this one for judges to make findings in the alternative. However, as
the judge ruled the batch records to be unreliable and the appellants have not
contested this finding, all her comments on this alternative argument are obiter.
[8]
Merck
argued that it was not necessary to discuss the appellants’ various arguments if
the Court accepts its position that the judge erred in her interpretation of
section 55.1 of the Patent Act, RSC 1985, c P-4 (or section 39.2 of the
old Act) by refusing to place upon Apotex the burden of persuading her that
BT’s process did not infringe the ‘380 patent.
[9]
At the
hearing, Apotex suggested that it would not be appropriate for this Court to
decide this issue in this case, for the judge did not have the benefit of full
arguments on this issue. In particular, Apotex notes that the reference to
subsection 1709(11) of NAFTA and section 3 of the North American Free
Trade Agreement Implementation Act, SC 1993, c 44 were not brought to her
attention.
[10]
I agree
that this issue is better left for another day. The burden of proof is not
determinative of this appeal. However, nothing in these reasons should be taken
as endorsing the judge’s analysis of section 55.1 which, as mentioned, was made
on an incomplete record.
AFI’s CR0157 Batch
[11]
AFI
submits that the judge erred in concluding that the AFI-1 DNA detected by Dr.
Davis was not the result of contamination during this expert’s experiments
because she failed to consider substantial relevant evidence (their own expert
evidence, their lay witnesses’ evidence, as well as their batch records which
were accepted as business records).
[12]
Essentially,
AFI invites this Court to reweigh all the evidence with respect to this
particular batch. It did not point to any particular error in the 36 pages
devoted to the analysis of all the expert evidence.
[13]
Even
though the judge refers to the testimony of AFI’s lay witnesses in other parts
of her judgment, AFI appears to suggest that it can be inferred from her
“failure” to state specifically that the evidence of Dr. Davis convinced her,
on a balance of probabilities, “despite the evidence of these lay witnesses and
AFI batch records”, that she did not consider this evidence.
[14]
In Housen
v Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235 [Housen] (at paragraph 46)
the Supreme Court of Canada made it clear that the trial judge is presumed to
have considered all the information on the record and that the simple failure
to rely expressly on, or to mention, some of the contradictory evidence in the
reasons is insufficient proof to reverse such presumption.
BT’s Post-February 1998 Batches
(i)
AFI’s Submissions
[15]
I am not
persuaded that AFI demonstrated the existence of a palpable and overriding
error in this finding of fact of the judge.
[16]
Turning
now to the finding with respect to the batches made in China for exportation to Canada starting in March 1998, AFI
raises two issues which, in its view, vitiate the judge’s ultimate finding of
fact that this material was more likely than not to have been made using the
AFI-1 process. First, it states that the judge erred in not finding that the
RC-14 impurity levels of the batches made during that period were consistent
with the continued use of AFI-4 to make this lovastatin. Second, AFI argues
that the judge erred in her assessment of Mrs. Hu’s evidence which supported
the use of AFI-4 during the said period. More particularly, AFI states that the
judge gave no weight to the testimony of this witness and failed to adequately
explain why she disbelieved Mrs. Hu, especially considering that, contrary to
the rule in Browne v Dunn (1893), 6 R 67 (HL), the credibility of this
witness with respect to the microorganism use for the fermentation at BT at
that time was not challenged on this point and she was given no opportunity to
explain her position.
[17]
I do not
agree. As to the RC-14 levels, not only has AFI failed to rebut the presumption
that this evidence was considered, but it is clear from the reasons (paragraphs
194-198) that the judge was alert and alive to this issue. As noted in Waxman
v Waxman (2004), 186 OAC 201 (CA), 44 BLR (3d) 165, [Waxman] at paragraph
344, the fact that a judge does not re-discuss particular evidence presumably means
that she did not find it significant enough to warrant further discussion. AFI
failed to demonstrate a palpable error, let alone an overriding one.
[18]
The
principles applicable to the review of credibility findings by an appellate
court were recently summarized in Corlac Inc v Weatherford Canada Inc,
2011 FCA 228 at paragraphs 89-91. The judge explained in sufficient detail why
she did not find Mrs. Hu’s testimony to be credible. AFI has not established
that the judge misapprehended her testimony or that this is one of those rare
cases that warrant this Court’s intervention on a credibility finding.
(ii)
Apotex’
Submissions
[19]
Before
discussing the many issues raised by Apotex with respect to the finding of
infringement based on the post-February 1998 batches of lovastatin manufactured
by BT, I shall reiterate some basic principles.
[20]
First, to
succeed in their attack, the appellants had to establish that the errors they
raised, individually or taken together, constitute not only a clear and obvious
error (palpable) but more importantly, one that is overriding.
[21]
The
following statement of the Ontario Court of Appeal in Waxman at
paragraph 297 is particularly apposite here:
An "overriding"
error is an error that is sufficiently significant to vitiate the challenged
finding of fact. Where the challenged finding of fact is based on a
constellation of findings, the conclusion that one or more of those findings is
founded on a "palpable" error does not automatically mean that the
error is also "overriding". The appellant must demonstrate that the
error goes to the root of the challenged finding of fact such that the fact
cannot safely stand in the face of that error [reference omitted].
[22]
Second, the
deference accorded to a trial judge with respect to simple findings of facts
also applies to inferences she draws from the evidence. In Housen, the
Supreme Court of Canada describes the numerous reasons why this is so,
including that where evidence exists that may support the inference, a review
of the inference involves a reweighing of the evidence (paragraphs 19-25).
[23]
Third, as
Apotex spent some time trying to explain how the proceeding and the trial
evolved, most of which was disputed by Merck, it is useful to reiterate, as was
done in Waxman at paragraph 293, the wisdom of the policy favouring
appellate deference, especially in long trials where:
[t]he trial judge saw the
witnesses and heard the evidence unfold in a narrative with a beginning, a
middle, and an end. Our system of litigation is predicated on the belief that
it is through the unfolding of the narrative in the testimony of witnesses that
the truth will emerge. This court is not presented with a narrative, but
instead with a description or summary of that narrative from the trial judge in
her reasons, and from counsel in their written and oral arguments. The
descriptions provided by counsel are not designed to tell a story, but rather
to support an argument. Of necessity, and in keeping with their forensic role,
counsel's description of the narrative at trial is selective and focuses on
parts of the narrative or on a particular interpretation of a part of the
narrative.
[24]
Apotex
submits that the judge made several errors in processing the evidence before
her. First and most important, it says the judge made a fundamental error of
law by relying on the BT batch records that she had already rejected to reach certain
conclusions. She then relied on these conclusions to make her final finding that
it could be inferred from the totality of the evidence that BT was using the
infringing process (paragraphs 339-340). According to Apotex, this error is
extricable from the facts and vitiates her conclusion with respect to the fermentation
duration and recorded titres, the availability of P-2000, as well as her
determination that BT had the means to produce lovastatin with the infringing
process commencing in March 1998.
[25]
In the
same vein, Apotex argues that the judge also improperly relied on other
documents that had never been filed to establish the truth of their content,
including one that she had expressly refused to rely upon to support one of its
arguments with respect to the titres (paragraph 292 of the reasons).
[26]
Second,
Apotex submits that the judge erred in law when she drew an adverse inference
that there was no further evidence supporting AFI’s suggestion that BT could
have bought more P-2000 from other sources because she did not have evidence
that Mr. Zhou, the BT general manager in March 1998, was within the appellants’
exclusive control. According to Apotex, there was no evidence that the
appellants could even bring Mr. Zhou to testify, especially considering that as
of 2009 he was no longer the general manager of BT. He had been replaced by Mr.
Xu who Merck should have been able to compel to testify when he came to Canada
at some point during the trial. Also, Mr. Luo was equally available to Merck for
questioning.
[27]
Thirdly,
Apotex says that the judge erred in law by reaching a conclusion of fact as to
the attributes of the microorganism used for the production of lovastatin from March
1998 onward, as well as by drawing technical inferences in the absence of
expert evidence permitting her to do so. According to Apotex, Merck’s own expert,
Dr. Lazure, had mentioned in her report that she could not establish from the
BT batch records which microorganism was used in the process.
[28]
Apotex
raises other errors described in its memorandum and its outline of arguments
that need not be summarized here for, in general, they simply amount to an
invitation to reweigh the evidence. It argues that once all of the judge’s
errors are corrected, the evidence only supports a finding of continued use of
the AFI-4 process, since all that is left from the judge’s reasons is an opportunity
to infringe, and what Apotex refers to as the “Chinese articles”.
(iii)
Analysis
[29]
Apotex’
first argument is based on the premise that the judge misconstrued Merck’s
arguments. As mentioned earlier at paragraph 7 above, her comments in paragraph
244 of her reasons clearly indicate that she did not. She repeated, at
paragraph 270, that her conclusions with respect to fermentation duration were
conditional on the acceptance of the batch records. She did not need to repeat
this each and every time she referred to the said batch records and dealt with
the parties’ position based on this documentary evidence, which she had so
clearly and definitely put aside as unreliable.
[30]
I am not
persuaded that the judge based her ultimate finding of infringement on her
alternative findings, especially those dealing with the fermentation duration and
titres reflected in the batch records and on which Apotex put a particular
emphasis.
[31]
That said,
and even though the transfer of technology with respect to the AFI-1 process to
BT clearly establishes that BT had the means to make lovastatin using the
infringing process, the judge’s finding with respect to the “means” is the most
vulnerable of her findings. After dealing with the parties’ arguments based on
the batch records, as well as exhibits TX-76 and TX-94 (her final conclusion in
that respect is at paragraph 315), she does not explain her conclusion at
paragraph 316.
[32]
However, I
am not satisfied that this is an overriding error. Putting aside an erroneous
finding that Merck had established on a balance of probabilities that BT had
the “means” is not the same as a finding that BT did not have such
means. There was ample other evidence on which it was open to the judge to find
that BT was using the infringing process from March 1998 onward.
[33]
To
conclude my assessment of Apotex’ arguments relating to the batch records, I note
that the reference to the quantity of P-2000 required to run the fermentation
batches in paragraph 253 does not vitiate the judge’s findings under the
heading of “P-2000”. There was sufficient evidence in the file for the judge to
conclude that the quantity of P-2000 necessary to complete the production of
lovastatin, using the AFI-4 process, was vastly superior to the quantity shipped
to BT by AFI. There was simply no need for the judge to quantify the exact amount
required.
[34]
Apotex’
second argument is also ill-founded. In my view, this issue does not raise an extricable
error of law, but at best a question of mixed fact and law. The law with
respect to such adverse inferences is well settled. The principle applied by
the Supreme Court of Canada in Levesque v Comeau, [1970] S.C.R. 1010 was
not new (Blatch v Archer (1774), 1 Cowp 63, 98 ER 969 at page 65) and
was recently discussed by the Supreme Court of Canada in R v Jolivet,
2000 SCC 29, [2000] 1 S.C.R. 751 at paragraphs 25-28. It must be applied with
caution and depends entirely on the specific facts of the case. Such inference
is not mandated and remains a matter of discretion for the trier of facts.
[35]
The judge
notes at paragraph 258 of her reasons that “there are obviously people
associated with [BT] who could have provided evidence of additional purchases
of P2000, if such purchases had taken place.” She viewed that evidence as
particularly important and relevant to determine whether, as argued by the
appellants, the AFI-4 process had been used.
[36]
In the
unique circumstances of this case, I am not persuaded that such witnesses (Mr.
Zhou was only an example and was not meant to limit the statement) were not
under the exclusive control of AFI who was the largest shareholder in the joint
venture with BT. It is clear that BT had provided documentary evidence as well
as witnesses (Mr. Luo and Mrs. Hu) to support the appellants’ case and they were
willing to assist them: see Alan W. Bryant, Sydney N. Lederman and Michelle K.
Fuerst, Sopinka, Lederman & Bryant: The Law of Evidence in Canada, 3rd
ed. (Toronto: LexisNexis Canada Inc.,
2009) at paragraph 6.449.
[37]
Apotex did
not adduce any evidence establishing that under Chinese law these witnesses or BT’s
documentary evidence, not already in the possession of the appellants, could be
compelled.
[38]
The judge
was better acquainted with all these issues than this Court and she was clearly
of the view that, at least with respect to other relevant facts, the appellants
– AFI in particular – had presented obstacles to uncovering those facts (paragraph
201 of the reasons). As noted at the hearing, Mr. Luo, despite his senior
position at BT, claimed to be unaware of any matter that did not fall directly
under his supervision (paragraph 229 of the reasons). There is no indication
that Merck knew or ought to have known that he was in charge of purchases, if
indeed he was.
[39]
Apotex has
not demonstrated a palpable and overriding error in the judge’s
inference-finding process or in her conclusion in that respect.
[40]
Turning
now to the third error of law alleged by Apotex, it is clear that Dr. Lazure’s
comments did not support Apotex’ point of view in any way. In fact, these
comments reinforce the conclusion that the BT batch records were unreliable for
they should have contained information enabling an expert to identify which
microorganism was used in the process. Be it as it may, this evidence is not
particularly relevant, nor is the alleged error, given that the judge’s
findings with respect to the titres, fermentation durations, and the “means”
need not be discussed further for they are obiter. In my view, they had
no impact on the judge’s ultimate finding at paragraphs 339 and 340.
[41]
Leaving
aside the judge’s alternate findings, as well as her conclusion with respect to
the “means”, I am of the opinion that the judge could reasonably infer from the
totality of the evidence before her that BT had manufactured lovastatin using
the infringing AFI-1 process during the relevant period. The appellants have
not demonstrated any overriding error in that respect. There was sufficient
evidence to support the judge’s finding.
[42]
For these
reasons, I would dismiss the appeal with costs.
“Johanne
Gauthier”
“I
agree
John.
M. Evans J.A.”
“I
agree
David
Stratas J.A.”
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