Date: 20110301
Docket:
A-371-10
Citation: 2011 FCA 77
CORAM: SEXTON
J.A.
LAYDEN-STEVENSON
J.A.
STRATAS
J.A.
BETWEEN:
APOTEX INC.
Appellant
and
PFIZER IRELAND
PHARMACEUTICALS
Respondent
REASONS FOR
JUDGMENT
SEXTON J.A.
[1]
This
is an appeal from an order of Justice Hughes (the “Motions Judge”), allowing in
part Apotex’s motion to strike certain allegations from Pfizer Ireland’s (together
with its Canadian licensee, “Pfizer”) statement of defence in this impeachment
action. Apotex now seeks to strike certain defences that the Motions Judge
allowed to stand, including issue estoppel, collateral estoppel, comity, and
abuse of process.
[2]
I
believe this appeal should be allowed in part. In summary, the defences
purporting to bar relitigation of the issue of the validity of the patent at
issue should be struck, but the other impugned defences relating to subsidiary
issues should be allowed to stand, to be dealt with in the discretion of the
trial judge.
History of Proceedings
[3]
The
decision under appeal arises out of continuing litigation in which Apotex seeks
authorization to market a generic version of Pfizer’s drug VIAGRA (sildenafil
citrate). This action concerns Canadian Letters Patent No. 2,163,446 (the
“‘446 patent”), which was filed by Pfizer on May 13, 1994 and issued on July 7,
1998. The patent will expire on May 13, 2014.
[4]
Apotex
previously sought to challenge the ‘446 patent under the Patented Medicines
(Notice of Compliance) Regulations, SOR/93-133. By notice of allegation
dated June 15, 2005, it sought a Notice of Compliance (an “NOC”) allowing it to
market generic sildenafil citrate. Apotex argued that its generic sildenafil
citrate would not infringe the ‘446 patent, and that the patent was invalid.
On September 27, 2007, Justice Mosley granted Pfizer’s application for an order
prohibiting the Minister of Health from issuing Apotex an NOC until after the
expiry of the ‘446 patent (the “‘446 NOC proceedings”). As part of the
decision, he rejected Apotex’s argument that the patent was invalid (Pfizer
Canada v. Apotex, 2007 FC 971). An appeal from that decision was dismissed
(2009 FCA 8).
[5]
Apotex
commenced the present action by statement of claim dated May 13, 2009. It
seeks a declaration that: (a) the ‘446 patent is invalid; and (b) Apotex’s
generic sildenafil citrate would not infringe any valid claim of the ‘446
patent.
[6]
In
its statement of defence, Pfizer described the ‘446 NOC proceedings as part of
the factual background to this action. It also repeatedly asserted that Apotex
is precluded from relitigating certain issues because of “res judicata, issue
estoppel, collateral estoppel, comity and abuse of process” as a result of the
‘446 NOC proceedings.
[7]
Apotex
then moved before the Federal Court pursuant to Rule 221(1)(a) of the Federal
Courts Rules, SOR-08/106, to strike from Pfizer’s statement of defence
certain paragraphs referring to the ‘446 NOC proceedings on the grounds that
they disclose no reasonable defence.
[8]
The
motion was dismissed by Prothonotary Aalto, who held that it should be open to the
trial judge to determine whether res judicata principles are applicable
where the same evidence is introduced in NOC proceedings and a subsequent
impeachment action. The Motions Judge reviewed the Prothonotary’s decision de
novo. He struck the defence of res judicata on Pfizer’s consent,
but declined to strike anything else. Relying on the decisions in Merck
& Co. v. Apotex, [2004] 2 F.C.R. 459, 2003 FCA 488 [Merck] and Connaught
Laboratories v. Medeva Pharma (1999), 179 F.T.R. 200 (T.D.), he held that
Apotex had not met the high standard required for pleadings to be struck.
Analysis
[9]
The
parties do not dispute that the Motions Judge was correct in approaching the
issue de novo. This court is therefore reviewing the decision of the
Motions Judge rather than that of the Prothonotary. The court may interfere
with the Motions Judge’s decision where “the motions judge had no grounds to
interfere with the prothonotary’s decision, or in the event such grounds
existed, if the decision of the motions judge was arrived at on a wrong basis
or was plainly wrong” (Z.I. Pompey Industrie v. ECU-Line N.V., [2003] 1
S.C.R. 450, 2003 SCC 27 at paragraph 18; Merck at paragraph 20). In
this case, Apotex alleges what amounts to a pure error of law. This
constitutes an allegation that the decision of the Motions Judge was arrived at
“on a wrong basis”, and the standard of review is effectively correctness.
[10]
According
to the Supreme Court, the power to strike a pleading should be exercised with
restraint. A pleading should only be struck on the grounds that it discloses
no reasonable defence where it is “plain and obvious” that it is certain to
fail (Hunt v. Carey Canada, [1990] 2 S.C.R. 959 at 980; Apotex v.
Syntex Pharmaceuticals International, 2005 FC 1310 at paragraph 31, affirmed
2006 FCA 60).
[11]
Apotex
argues that this court’s jurisprudence makes it plain and obvious that no
findings in an NOC proceeding can preclude relitigation in a subsequent
infringement and impeachment proceeding. Pfizer responds that this jurisprudence
is premised on the fact that parties have broader opportunities to gather and
present evidence in actions than they do in NOC proceedings. In NOC
proceedings, there is no right of discovery and no opportunity to present viva
voce evidence. According to Pfizer, issue estoppel and related doctrines
may apply where a party seeks to relitigate an issue decided in NOC proceedings
on the same evidence, with the same arguments. It argues that it would be
inappropriate to strike the defences at least until Apotex introduces new
evidence or new argumentation.
[12]
Apotex
is correct that this court has taken a dim view of attempts to prevent
relitigation of issues decided in NOC proceedings in subsequent actions.
Because of the extent to which Apotex relies on the prior jurisprudence, it is
worth reviewing it in some detail.
[13]
This
court first dealt with the issue in two early cases. In Merck Frosst Canada
v. Canada (Minister of
National Health and Welfare) (1994), 55 C.P.R. (3d) 302 (C.A.) [Merck
1994], Justice Hugessen wrote:
The proceedings are not an action and
their object is solely to prohibit the issuance of a notice of compliance under
the Food and Drug Regulations. Manifestly, they do not constitute "an
action for infringement of a patent"
…
In this connection, it may be noted that,
while subparagraph 7(2)(b) seems to envisage the Court making a
declaration of invalidity or non-infringement, it is clear to me that such
declaration could not be given in the course of the section 6 proceedings
themselves. Those proceedings, after all, are instituted by the patentee and
seek a prohibition against the Minister; since they take the form of a summary
application for judicial review, it is impossible to conceive of them giving
rise to a counter-claim by the respondent seeking such a declaration. Patent
invalidity, like patent infringement, cannot be litigated in this kind of
proceeding. I can only think that the draftsperson had in mind the possibility
of there being parallel proceedings instituted by the second person which might
give rise to such a declaration and be binding on the parties (at paragraphs 23
and 25).
[14]
The
issue arose again later that year in Pharmacia v. Canada (Minister of Health and
Welfare)
(1994), [1995] 1 F.C. 588 (C.A.). Justice Strayer quoted at length from the
decision in Merck 1994, and added the following comments:
If the Governor in Council had intended
by these Regulations to provide for a final determination of the issues of
validity or infringement, a determination which would be binding on all private
parties and preclude future litigation of the same issues, it surely would have
said so. This Court is not prepared to accept that patentees and generic
companies alike have been forced to make their sole assertion of their private
rights through the summary procedure of a judicial review application. As the
Regulations direct that such issues as may be adjudicated at this time must be
addressed through such a process, this is a fairly clear indication that these
issues must be of a limited or preliminary nature. If a full trial of validity
or infringement issues is required this can be obtained in the usual way by
commencing an action (at paragraph 14).
[15]
In Pfizer
Canada v. Apotex (2001), 11 C.P.R. (4th) 245 (C.A.), the issue
arose in the context of whether an appeal from an order dismissing an
application for a prohibition order was moot after the NOC was issued. Justice
Isaac wrote:
It should be noticed that a decision by
this Court that the appeals are moot does not mean that the appellants are
without remedies. They may commence actions for infringement if so advised and
the facts warrant. This Court has been very clear on the fact that section 6
proceedings are not adjudicative of the rights of the patentee…In these
circumstances, it is idle to suggest that any decision that this Court makes in
these appeals could be used to attack collaterally a judgment in an
infringement action (at paragraph 25).
[16]
Justice
Strayer dealt with the issue again in Novartis v. Apotex (2002), 22 C.P.R.
(4th) 450 (C.A.). He wrote:
The basic principle is that
the extraordinary procedures provided by the Regulations are for the public law
purpose of enabling the Trial Division to prevent a public officer from issuing
a Notice of Compliance, designed for the protection of the public's health, if
the patentee can show that the patents, as referred to by a generic company in
its notice of allegation seeking a Notice of Compliance, are owned by the
applicant "first person" and that the relevant claims are not invalid
and would be infringed. This is a finding of the Court for the limited purpose
of deciding whether or not the Minister can issue a Notice of Compliance: no
one could suppose that this is a scheme designed for res judicata
determinations of the scope or validity of patents (at paragraph 9).
[17]
In
Sanofi-Aventis Canada v. Novopharm, [2008] 1 F.C.R. 174, 2007 FCA 163 [Sanofi-Aventis],
this court noted that “the
courts have on numerous occasions stated the principle that decisions rendered
under the NOC Regulations are not binding on actions for patent infringement or
to declare a patent invalid” (at paragraph 36). In Eli Lilly Canada v.
Novopharm, [2008] 3 F.C.R. 449, 2007 FCA 359, another mootness case, the
court wrote:
It is settled law that decisions under
the NOC Regulations cannot be taken as an in rem determination of the
validity of patents.
…
NOC proceedings were never intended to be
substitutes for an infringement action (at paragraphs 40 and 41).
[18]
Each
of the above cases dealt only with whether decisions as to validity or
infringement made in an NOC proceeding were binding in a subsequent action.
When it denied the application of res judicata in these cases, the
courts meant the term in the sense of cause of action estoppel, the doctrine
that a party cannot relitigate a cause of action that has already been dealt
with. Though Pfizer initially pleaded this as a defence in this case, it
conceded the inapplicability of res judicata before the Prothonotary,
and res judicata was struck by Justice Hughes on consent.
[19]
Res
judicata in
the sense of cause of action estoppel is inapplicable because the subject
matter of an infringement or impeachment action is very different from that of
an NOC proceeding. The question before a judge in NOC proceedings is simply
whether the allegations of invalidity or non-infringement contained in a notice
of allegation are justified. This narrow determination is relevant only to
whether the court should prohibit the Minister of Health from issuing a NOC.
It cannot be seen as a definitive answer to the very different question of
whether the patent at issue is valid or infringed. For the same reason, issue
estoppel, abuse of process and the other defences pleaded by Merck also cannot
apply to the question of a patent’s validity. Simply put, the issues of
validity and infringement are not before the court in an NOC proceeding. However,
this principle does not extend as far as Apotex suggests. Even where a later
proceeding involves issues quite different from an earlier proceeding, it may
be open to a judge to apply the doctrines of issue estoppel or abuse of process
in the later proceeding to prevent a party from relitigating certain factual
and legal issues decided in the earlier proceeding: Danyluk
v. Ainsworth Technologies Inc., [2001] 2 S.C.R. 460, 2001
SCC 44 [Danyluk] (involving issue estoppel) and Toronto
(City) v. Canadian Union of Public Employees (C.U.P.E.), Local 79, [2003] 3
S.C.R. 77, 2003 SCC 63 [C.U.P.E.] (involving abuse of process). Danyluk
and C.U.P.E. both emphasize that these bars against relitigation are
discretionary and that the discretion must be exercised taking into account a
wide variety of circumstances. Normally, as here, these circumstances are not before
the court on a pleadings motion.
[20]
In
C.U.P.E., the Supreme Court of Canada explored the rationales underlying
issue estoppel and abuse of process. According to Justice Arbour, writing for
the majority, relitigation of an issue can undermine the integrity of the
adjudicative process:
The policy grounds supporting
abuse of process by relitigation are the same as the essential policy grounds
supporting issue estoppel (Lange, supra, at pp. 347‑48):
The two policy grounds, namely, that
there be an end to litigation and that no one should be twice vexed by the same
cause, have been cited as policies in the application of abuse of process by
relitigation. Other policy grounds have also been cited, namely, to preserve
the courts’ and the litigants’ resources, to uphold the integrity of the legal
system in order to avoid inconsistent results, and to protect the principle of
finality so crucial to the proper administration of justice (C.U.P.E. at
paragraph 38).
[21]
Justice
Arbour also noted that relitigation might be permitted in certain circumstances,
including where fresh evidence becomes available. However, she emphasized that
the application of abuse of process or issue estoppel in individual cases to
bar relitigation is a discretionary matter for the trial judge:
In contrast, proper review by way of
appeal increases confidence in the ultimate result and affirms both the
authority of the process as well as the finality of the result. It is
therefore apparent that from the system’s point of view, relitigation carries
serious detrimental effects and should be avoided unless the circumstances
dictate that relitigation is in fact necessary to enhance the credibility and
the effectiveness of the adjudicative process as a whole. There may be
instances where relitigation will enhance, rather than impeach, the integrity
of the judicial system, for example: (1) when the first proceeding is tainted
by fraud or dishonesty; (2) when fresh, new evidence, previously unavailable,
conclusively impeaches the original results; or (3) when fairness dictates that
the original result should not be binding in the new context. This was stated
unequivocally by this Court in Danyluk,supra, at para. 80.
The discretionary factors that apply to
prevent the doctrine of issue estoppel from operating in an unjust or unfair way
are equally available to prevent the doctrine of abuse of process from
achieving a similar undesirable result. There are many circumstances in which
the bar against relitigation, either through the doctrine of res
judicata or that of abuse of process, would create unfairness. If, for
instance, the stakes in the original proceeding were too minor to generate a
full and robust response, while the subsequent stakes were considerable,
fairness would dictate that the administration of justice would be better served
by permitting the second proceeding to go forward than by insisting that
finality should prevail. An inadequate incentive to defend, the discovery of
new evidence in appropriate circumstances, or a tainted original process may
all overcome the interest in maintaining the finality of the original decision
(C.U.P.E. at paragraphs 52-53).
[22]
In
Sanofi-Aventis, this court recognized that an abuse of process could arise
as a result of an earlier NOC proceeding. Although the question in that case
was whether it could be abusive for an innovator to relitigate issues decided
in one NOC proceeding in a subsequent NOC proceeding, the same principles apply
here. In following C.U.P.E., the court wrote:
Sanofi‑Aventis and Schering also
emphasize that proceedings under the NOC Regulations are of a preliminary
nature and are accompanied by limited procedural safeguards. While this
argument may be sufficient to establish that decisions made in the context of
the NOC Regulations should not be binding on judges adjudicating actions for
patent infringement or declarations of patent invalidity, it does not change
the fact that relitigation by a first person of an issue already decided
against it within the context of the NOC Regulations is generally not
permissible. As I have already said, the possibility of different judges
adjudicating equivalent proceedings concerning the same issue reaching
different results threatens the integrity of the adjudicative process. The
nature of the proceedings does not change this reality (at paragraph 49).
[23]
Only
one case decided by this court deals specifically with whether subsidiary
findings in an NOC proceeding can have binding effect in a subsequent action.
In Ratiopharm v. Pfizer, 87 C.P.R. (4th) 185, 2010 FCA 204 [Ratiopharm],
Pfizer argued that a factual conclusion from an NOC proceeding should bind the
court in a subsequent impeachment action. Writing for the court, Justice
Layden-Stevenson rejected that argument:
This Court has repeatedly stated that
what I will refer to as "NOC proceedings" do not operate as res
judicata. While Pfizer may be correct that the factual basis in the NOC
proceeding is the same as that in this action, it does not follow that the
evidentiary basis is the same. Factual findings are derived from the evidence
that is before the court in the particular proceeding.
The trial judge was aware of the previous
NOC proceedings in relation to the '393 Patent and considered them to be
instructive (reasons at para. 18). However, he was not and could not be bound
by the factual determinations in a prior NOC proceeding. Rather, it was
incumbent upon the judge to arrive at his findings on the basis of the evidence
that was before him (at paragraphs 25 and 26, emphasis added).
Justice Layden-Stevenson implicitly left
open the possibility that issue estoppel or abuse of process could apply to
prevent relitigation of the factual issue where the evidentiary record at trial
was identical to that of the NOC proceeding. It is also significant that she
considered the applicability of those defences after trial and on a full
factual record, rather than at a preliminary stage.
[24]
This
court has repeatedly said that NOC proceedings are quite different from
subsequent infringement or impeachment actions. In my view, there is scope for
applying the bars of issue estoppel and abuse of process in the later
proceedings to prevent the relitigation of subsidiary factual and legal issues in
order to preserve judicial resources, promote the integrity of the justice
system, prevent inconsistent findings, and prevent abuse. The difference
between the NOC proceeding and later proceedings is an important consideration
for the judge in the later proceedings, along with all of the other
discretionary considerations discussed in Danyluk and C.U.P.E. Simply
put, Danyluk and C.U.P.E. can apply in proceedings such as these.
[25]
Given
the foregoing analysis to the effect that res judicata does not apply to
the determination of validity and infringement, the parties remain free to
launch proceedings on those issues in other fora. Where a party introduces
significant and important new evidence or raises significant and important new
argumentation in the subsequent action, the trial judge should reconsider the
issue in light of the full record before him or her (Ratiopharm at
paragraphs 25 and 26). In applying the rule that issue estoppel generally
precludes parties from raising arguments or issues that could have been raised
at the original hearing, courts should be cognisant of the summary nature of
NOC proceedings and the fact that no discoveries or live evidence are
permissible.
[26]
Specific
applications of the principles in Danyluk and C.U.P.E. should
await later cases. But, for clarity, I offer one illustration. If a witness
gives exactly the same evidence in both proceedings, and the judge found the
witness not to be credible in the NOC proceedings, it may be open to the trial
judge in the action to bar relitigation of the witness’s credibility through
issue estoppel or abuse of process. On the other hand, if the witness gives
different or additional evidence at the action, the trial judge may be
justified in reconsidering the witness’s credibility. There may of course be
other considerations as well. Obviously, this is a discretionary matter.
Suffice to say, the facts that will inform the discretion are not known in a
pleadings motion.
[27]
I
acknowledge a risk that parties may be tempted to make submissions concerning
issue estoppel and abuse of process witness by witness, document by document,
thereby prolonging proceedings. It must be remembered that issue estoppel
and abuse of process exist primarily as pragmatic rules intended to promote
judicial economy and efficiency. Those who act in a way such that pragmatism,
judicial economy and efficiency are adversely affected, may find that the judge
exercises his or her discretion in order to prevent such conduct. Danyluk
and C.U.P.E. empower the judge to prevent abuses from happening. Thus the
manner in which parties litigate questions of issue estoppel and abuse of
process in the proceedings may well affect the judge's discretion, alongside
the other Danyluk and C.U.P.E. factors, regarding whether
relitigation should be permitted.
[28]
In
any event it is evident that at this stage, in this pleadings motion, it is not
possible to determine one way or the other whether the discretionary bars of
issue estoppel and abuse of process apply.
Conclusion
[29]
For
those reasons, this appeal is allowed in part. It is plain and obvious that
Pfizer’s defences of issue estoppel, collateral estoppel, comity, and abuse of
process cannot apply to bar litigation of the validity issue. Paragraphs 11,
14, and 44, along with the third sentence in paragraph 37 and the words “and
the finding in the T-1314-05 Proceedings” in paragraph 45, will be struck from
its statement of defence. The other paragraphs at issue, however, relate to
distinct subsidiary findings of Justice Moseley. These will be allowed to
stand, as the trial judge retains the discretion to evaluate whether these
findings may be relitigated in light of the evidence and arguments introduced
at trial. In light of its substantial success, Pfizer is entitled to its
costs.
“J.
Edgar Sexton”
“I
agree
Carolyn Layden-Stevenson J.A.”
“I
agree
David Stratas J.A.”
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