Date: 20061213
Docket: A-500-06
Citation: 2006 FCA 406
Present: SHARLOW
J.A.
BETWEEN:
NOVOPHARM LIMITED
Appellant
And
JANSSEN-ORTHO INC.,
and DAIICHI PHARMACEUTICAL CO., LTD.
Respondents
REASONS FOR ORDER
SHARLOW J.A.
[1]
The
appellant Novopharm Limited seeks a stay of the judgment of Justice Hughes dated
October 17, 2006 (2006 FC 1234). The judgment declares claim 4 of Canadian
Letters Patent No. 1,304,080 (the 080 Patent) to be valid and infringed by
Novopharm, and grants certain remedies including an injunction that took effect
on November 17, 2006, and an order for the destruction of the infringing
products or its delivery to the respondents. The appellant’s notice of motion
for a stay was filed on November 29, 2006.
Litigation history
[2]
Canadian Patent Number 1,304,080 is entitled "Optically
Active Pyridobenzoxazine Derivatives and Intermediates Thereof". Claim
4 reads:
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4. S(-)-9-fluoro-3-methyl-10-(4-methyl-1-piperazinyl)-7-oxo-2,3-dihydro-7H-pyrido[1,2,3-
de][1,4]benzoxazine-6-carboxylic acid.
|
[3]
The Patent was issued and granted to the
respondent Daiichi Pharmaceutical Co. Ltd. on June 23, 1992 and will expire on
June 23, 2009. The respondent Janssen-Ortho Inc. is a licensee of the Patent. The
short name of the compound named in Claim 4 is levofloxacin. Levofloxacin is
the principal ingredient in a drug called Levaquin, an antibiotic. Janssen has marketed
Levaquin in Canada since 1997.
It is also the principal ingredient in Novo-levofloxacin, which has been
marketed in Canada by Novopharm
since 2004.
[4]
On December
6, 2004, Janssen and Daiichi commenced a patent infringement action against
Novopharm on the basis that its manufacture and sale of Novo-levofloxacin
infringed the 080 Patent. Novopharm defended and counterclaimed, alleging that
the 080 Patent was invalid. The issues were narrowed so that by the time of
trial, only Claim 4 of the 080 Patent was in issue and infringement was
admitted, leaving only the issue of validity of Claim 4 to be litigated.
[5]
The trial occurred
in September and October of 2006. The judgment under appeal was issued on
October 17, 2006. The Judge concluded that Claim 4 was valid.
[6]
One of the
grounds of invalidity alleged in the infringement action was obviousness.
Substantially the same argument had been made and rejected in prohibition
proceedings under the Patented Medicines (Notice of Compliance Regulations),
SOR/93-133 (Janssen-Ortho Inc. v. Novopharm Ltd.,
2004 FC 1631, appeal dismissed as moot, Janssen-Ortho Inc. v. Novopharm Ltd.,
2005 FCA 6, leave to appeal to the Supreme Court of Canada dismissed, [2005] 1
S.C.R. 776). However,
it is well established by the jurisprudence of this Court that conclusions
about infringement and invalidity of a patent in a prohibition application are
not final determinations, but merely provisional findings for limited regulatory
purposes. That is why it was open to Janssen and Daiichi to commence an action
to seek a remedy for infringement even though their prohibition application did
not succeed.
[7]
The
parties agree that the applicable legal principles are those set out in RJR
– MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311. The
respondents concede that the first test for the granting of a stay, the
existence of an arguable case on appeal, is met. The issues are whether the
appellant will suffer irreparable harm if the stay is not granted, and if so
whether the balance of convenience favours granting a stay.
[8]
Novopharm alleges
two forms of harm. One is irreparable harm to its reputation. I agree that
irrevocable damage to reputation may form part of the basis for a stay. The
issue is whether the evidence adduced by Novopharm on this point substantiates
this claim.
[9]
Novopharm
argues that it has invested considerable time and resources in establishing for
itself a well founded reputation for providing first access to the latest
generic drugs, and for having the capacity to maintain a consistent supply, and
that if a stay is not granted in this case, its reputation will be damaged
beyond repair once its customers find themselves unable to look to Novopharm to
provide them with Novo-levofloxacin.
[10]
There is
credible evidence that Novopharm has a good reputation. I am prepared to accept
that Novopharm’s customers may well believe what Novopharm apparently tells
them, which is that Novopharm is better than other generic producers in terms
of first access and consistency of supply. I also accept that Novo-levofloxacin
is a very important product to Novopharm, even though it represents only one of
190 products and brings in approximately 2% of Novopharm’s sales revenue,
because it is the best selling generic medicine of which Novopharm is the sole
supplier. I also accept that if Novopharm can no longer supply Novo-levofloxacin
to its customers, some of those customers may over time look to other suppliers
for levofloxacin medicines, and for other products as well.
[11]
However, I
am unable to find on the record before me that, on a balance of probabilities, an
interruption in the supply of Novo-levofloxacin will irrevocably damage the good
reputation of Novopharm in terms of first access and consistency of supply
where, as in this case, that interruption in supply is the result of a lost
court case. I have no basis for attributing to Novopharm’s customers the
irrational belief that, because Novopharm has apparently failed in this
instance to control the outcome of litigation, it does not deserve its good
reputation.
[12]
Novopharm
also alleges that it will suffer irreparable financial loss if the stay is not
granted and the appeal is allowed because it will have lost sales that it will
never recover, and also because it may permanently lose other sales. There is
merit in this allegation. However, Janssen and Daiichi say that they are
prepared to make an undertaking in the form adopted by Evans J.A. in Apotex
Inc. v. Merck & Co., Inc., 2006 FCA 198, which will be a complete
answer to Novopharm’s concern about financial loss. The form of undertaking is
as follows:
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The
respondents undertake to abide by any order that the Court may make
concerning damages if the appeal of [Appellant] of the judgment of [Judge]
dated [date] in Court File No. [Docket] is allowed and it ultimately appears
that the judgment has caused damage to [Appellant] for which the respondents
ought to compensate [Appellant] during the time period beginning on the day
that this Court dismisses the motion for a stay and ending on the day that
this Court grants the appeal.
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[13]
It is
common ground that this undertaking contemplates compensation for all financial
losses that Novopharm would suffer as a direct or indirect result of the
injunction, if the stay is not granted and the appeal succeeds.
[14]
Novopharm says
that this form of undertaking is flawed because it deals with the period that
ends with the disposition of the appeal. Novopharm argues that if the stay is
not granted, its losses will accrue even after the disposition of the appeal
and for some indeterminable time after that, because it will take some time to
re-establish its customer relationships and its market. Counsel for Janssen
indicates that Janssen is prepared to agree to an undertaking in which the
period of time for the accrual of damages will end at some reasonable time
after the disposition of the appeal. Two to six months is suggested, because
that is the amount of time Novopharm says would be required to have its product
returned to provincial formularies. Counsel for Daiichi says that Daiichi has
not agreed to such an extension.
[15]
In my
view, an undertaking in the form set out above, with the suggested extension of
the term, would be a complete answer to Novopharm’s allegation of irreparable
financial harm. I conclude that, provided the undertakings indicated above are
given, Novopharm has not established irreparable harm. The relevant period
should extend for approximately four months after the date of the disposition
of the appeal.
[16]
It is not
necessary for me to consider the balance of convenience, but I will do so
because it was fully argued. I have not been persuaded that granting the stay
would cause irreparable harm to Janssen or Daiichi. The result of the stay
would be to continue the situation that has existed since 2004, when Novopharm
entered the market in competition with Janssen and Daiichi. That was damaging
to them, but that damage is compensable.
[17]
Janssen
and Daiichi seek an expedited hearing of the appeal. That is a reasonable
request, if they provide the undertakings as stated above. Dates are available
in Toronto on March 13 and 14, 2007, and
all counsel have indicated that they can be available for a hearing on those
dates. An order will be made accordingly.
“K.
Sharlow”
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