Dockets: A-499-14
A-33-15
Citation:
2016 FCA 176
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CORAM:
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DAWSON J.A.
STRATAS J.A.
DE MONTIGNY J.A.
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BETWEEN:
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TEVA CANADA
LIMITED
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Appellant
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and
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GILEAD SCIENCES
INC.
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Respondent
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REASONS FOR JUDGMENT
STRATAS J.A.
[1]
In the Federal Court, Teva Canada Limited
brought two consecutive motions for leave to amend its statement of claim. By
orders dated November 3, 2014 and January 19, 2015, the Federal Court (both per
Barnes J.) dismissed the motions. Teva now appeals both.
[2]
These are the reasons for judgment on both
appeals. A copy of these reasons shall be placed in each appeal file.
[3]
In my view, the Federal Court committed no
reviewable error in making the orders. Therefore, I would dismiss the appeals
with costs.
A.
The impeachment action
[4]
In the summer of 2012, Teva issued a statement
of claim in the Federal Court impeaching claims 1 to 32 of Canadian patent
number 2,261,619 and claims 1 to 14 of Canadian patent number 2,298,059.
[5]
In that statement of claim, Teva alleges that
the claims in the ’619 Patent are invalid for obviousness, anticipation, lack
of utility and insufficient disclosure. It alleges that the claims in the ’059
Patent are invalid for obviousness, double patenting, overbreadth, lack of
utility and ambiguity. The allegations against the ’059 Patent have been
discontinued.
[6]
The ’619 and ’059 Patents have been the subject
of proceedings under the Patented Medicines (Notice of Compliance)
Regulations, SOR/93-133. In those proceedings, Teva’s notice of allegation
alleged that the inventors of the ’619 Patent had not soundly predicted
utility. In its statement of claim, Teva decided not to advance this ground.
[7]
The respondent, Gilead Sciences Inc., has
defended against the claim, denying all grounds of invalidity. Discoveries have
followed and are complete. Teva has had the opportunity to examine Gilead’s
discovery representative on two separate occasions, five of the six inventors
of the ’619 Patent, and the three inventors of the ’059 Patent.
B.
Teva’s first motion for leave to amend the
statement of claim
[8]
Roughly two years after the statement of claim
was issued, Teva moved for leave to amend its statement of claim. Some
amendments were of a minor, housekeeping nature; others were much more
contentious. The contentious amendments alleged that the ’619 Patent was
fraudulently obtained by misleading the Patent Office and, thus, the ’619
Patent is invalid and void for material misrepresentation contrary to
subsection 53(1) of the Patent Act, R.S.C. 1985, c. P-4.
C.
The Prothonotary’s ruling on the motion
[9]
The first motion came before the Prothonotary.
She granted the minor, housekeeping amendments.
[10]
As for the contentious amendments, she dismissed
the motion on the ground that the proposed amendments lacked particularity.
However she allowed Teva to renew its motion on further and better particulars.
D.
The motion in the Federal Court
[11]
Teva renewed its motion, this time adding
particulars such as the names of the inventors whose evidence it relies upon
and offering more details on the misrepresentation. Its motion came before the
Federal Court (per Barnes J., who is the designated trial judge).
[12]
Before the Federal Court, Teva submitted that
the allegations it wanted to add to its claim were based on evidence obtained
during discovery.
[13]
According to Teva, the ’619 Patent claims a vast
number of prodrugs of phosphonate nucleotide analogues. By the filing date of
the patent, Gilead had made only a small number of these compounds. Teva said
that on discovery, the inventors and the representative of Gilead admitted that
they had not made and did not believe they could make any predictions of
utility across the broad class of compounds claimed in the ’619 Patent.
[14]
In light of this, Teva took the view that Gilead
has committed a material misrepresentation by filing the ’619 Patent without a
factual foundation to prove or to soundly predict utility. So Teva sought to
amend its statement of claim to add this allegation, along with the material
facts supporting it.
[15]
By order dated November 3, 2014, the Federal
Court dismissed Teva’s motion. Its reasons for doing so shall be analyzed in
more detail below. But, in short, the Federal Court found that the amendments
improperly added allegations tantamount to fraud without sufficient evidence.
Further, the allegations had no reasonable prospect of success.
E.
The second motion in the Federal Court
[16]
Within two weeks of the Federal Court’s order on
the first motion, Teva brought a second motion seeking leave to amend its
pleadings. Teva relied on certain discovery evidence to assert that only a very
small number of the compounds claimed in the ’619 Patent had been made and that
the inventors did not and could not predict the efficacy of those compounds.
Teva noted that the ’619 Patent nevertheless claims these compounds.
[17]
From this, Teva sought to plead that the ’619
Patent is invalid because what is disclosed in the specification is not the
invention “as contemplated by the inventor,” as
required by subsection 27(3) of the Patent Act.
[18]
The second motion came before the Federal Court
(again per Barnes J., who is the designated trial judge). By order
dated January 19, 2015, the Federal Court dismissed the motion.
[19]
Again, the Federal Court’s reasons for
dismissing the motion will be considered further below. But for present
purposes, the Federal Court found that the proposed amendments were not
supported by the discovery evidence. The amendments lacked a reasonable
prospect of success. And, in the Federal Court’s view, Teva’s second motion
should have been brought with its first motion; it was essentially the same
motion brought on the same basis.
F.
The standard of review on appeal to this Court
[20]
In their memoranda of fact and law, the parties
disagreed concerning the standard of review that this Court should apply in
these appeals. However, by the time of the hearing in this Court, this Court
had released new jurisprudence on the standard of review.
[21]
In its memorandum, Teva suggested that the
issues associated with its pleadings amendment are vital to the final issues in
the case and so this Court should perform a de novo review. But that is
the standard of review applied in a Rule 51 appeal from a Prothonotary. Here,
Teva’s motions were decided on their merits by a judge of the Federal Court
acting on the merits at first instance, not as a Rule 51 appeal court.
[22]
In its memorandum, Gilead submitted that the
Federal Court’s decision is one of discretion. Therefore, it can be set aside
only if there was an error of law, a misapprehension of the facts or a wrongful
exercise of discretion in that no weight or no sufficient weight was given to
relevant considerations, or consideration was given to irrelevant factors.
[23]
But, in recent jurisprudence, this Court has altered
that formulation of the standard of review of orders such as the ones in this
appeal in an effort to homogenize the law on standard of review concerning all
appeals of orders. See Imperial Manufacturing Group Inc. v. Decor Grates
Incorporated, 2015 FCA 100, [2016] 1 F.C.R. 246 rev’g David Bull
Laboratories (Canada) Inc. v. Pharmacia Inc., [1995] 1 F.C. 588 at p. 594,
58 C.P.R. (3d) 209 at p. 213 (C.A.); see also, more recently, Turmel v.
Canada, 2016 FCA 9. In accordance with those recent authorities, the
standard of review for the orders before us is the usual appellate standard set
out in Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235.
[24]
Therefore, according to that recent
jurisprudence, to succeed in this appeal Teva must persuade us that the Federal
Court erred on a pure question of law or on a legal principle that can be
extracted from a question of mixed fact and law. Absent that sort of legal
error, Teva can succeed only if it demonstrates palpable and overriding error.
A palpable and overriding error is one that is both obvious and determinative
in the sense that it undermines the outcome reached below. See generally Canada
v. South Yukon Forest Corporation, 2012 FCA 165, 431 N.R. 286 at paragraph
46.
[25]
However, as will be seen, regardless of how one
enunciates the standard of review, the standard of review is deferential. And
as will be explained below, under that deferential standard Teva has failed to
persuade us that we should interfere with the Federal Court’s orders.
G.
Analysis of the order made on the first motion:
the November 3, 2014 order
[26]
Motions for leave to amend are governed by Rule
75 of the Federal Courts Rules, SOR/98-106. Amendments should be allowed
“for the purpose of determining the real questions in
controversy between the parties” as long as they “would serve the interests of justice” and they will not work “an
injustice to the other party” that is “not capable of being compensated by an award of costs”: Canderel Ltd. v. Canada, [1994] 1 F.C. 3 at p. 10,
[1993] F.C.J. No. 777 (C.A.).
[27]
In this Court, Teva stresses that pleadings
amendments prompted by evidence obtained at discovery, such as the amendments
it proposes here, are beneficial in that they can refocus and particularize points
in controversy, thereby facilitating the trial of an action: Dené Tha’ First
Nation v. Canada (Attorney General), 2008 FC 679, 168 A.C.W.S. (3d) 510
(Proth.); Hoechst Marion Roussel Deutchland Gmbh v. Adir et Cie (2000),
190 F.T.R. 233, 97 A.C.W.S. (3d) 891 (T.D.). It adds that Gilead has shown no
prejudice it would suffer if the amendments are granted.
[28]
But all that is potentially beside the point: it
makes no sense for a court to allow an amendment that is doomed to fail. Here,
Teva’s proposed amendments advance new grounds supporting the relief sought.
But if the grounds do not have some reasonable prospect of success, allowing
them into the litigation does nothing other than to complicate and protract it
needlessly and pointlessly.
[29]
Unsurprisingly, the absence of a reasonable
prospect of success is a well-established reason for a court to dismiss a
motion for leave to amend: Bauer Hockey Corp. v. Sport Maska Inc.
(Reebok-CCM Hockey), 2014 FCA 158, 122 C.P.R. (4th) 97; Visx Inc. v.
Nidek Co. (1996), 209 N.R. 342, 72 C.P.R. (3d) 19 at p. 24; and see also R.
v. Imperial Tobacco Canada Ltd., 2011 SCC 42, [2011] 3 S.C.R. 45 at paras.
17-20 on the meaning of “reasonable prospect of
success” in the context of motions to strike claims, a meaning that Bauer
suggests (at para. 16) equally applies on the issue whether the Court should
grant a proposed pleadings amendment.
[30]
The standard of “reasonable
prospect of success” is more than just assessing whether there is just a
mathematical chance of success. In deciding whether an amendment has a
reasonable prospect of success, its chances of success must be examined in the
context of the law and the litigation process, and a realistic view must be
taken: Imperial Tobacco, above at para. 25.
[31]
In the jurisprudence, the requirement that the
amendment have a reasonable prospect of success has become a threshold issue:
see, e.g., Remo Imports Ltd. v. Jaguar Cars Ltd., 2005 FC 870, 41
C.P.R. (4th) 111 at para. 49. Normally, only if that threshold is crossed will
the Court go further and investigate other matters, such as the prejudice the
opposing party may suffer as a result of the amendment.
[32]
In its analysis in support of the dismissal of
the first motion, the Federal Court proceeded in that way, considering whether
the proposed amendments had a reasonable prospect of success. The Federal Court
found that it did not need to consider any other matters: at the outset, it
found that Teva’s proposed amendments had no reasonable prospect of success:
In my view the
amendments proposed by Teva have, on the evidence presented, no reasonable
prospect of success. Even with a generous interpretation of the evidence put
forward by Teva, there is no possibility that relief under section 53 of the Patent
Act would be available.
(Para. 7 of the
Federal Court’s November 3, 2014 order.)
[33]
On appeal to us, Teva submits that this finding
is vitiated by legal error. Teva submits that the Federal Court improperly made
it easier for courts to find that a ground has no “reasonable
prospect of success.” Put another way, Teva says that the Federal Court
has departed from the liberal approach that it must follow when considering
whether to grant leave to amend pleadings.
[34]
In this regard, Teva focuses upon the Federal
Court’s statement (at para. 6 of its order) that “[t]he
landscape for permitting pleadings amendments has shifted somewhat since the
Supreme Court of Canada decision in Hryniak v. Mauldin, 2014 SCC 7,
[[2014] 1 S.C.R. 87].” The Federal Court added (also at para. 6) that “[a]lthough the guiding principle of a reasonable prospect of
success remains in place, it is tempered by the competing concerns about access
to justice, proportionality and judicial efficiency,” concepts the
Supreme Court emphasized in Hryniak.
[35]
I reject
Teva’s submission. In referring to Hryniak, the Federal Court did not
change the meaning of “reasonable
prospect of success” and thereby commit legal error.
[36]
Faced with
a submission that a first-instance court applied improper principle, an
appellate court must review in a holistic and fair way the reasons offered by
the first-instance court against the record before it. Often first-instance
courts do not describe the principles that bear upon their decisions in a
perfectly precise or encyclopedic way. Yet, in many such cases, a holistic and
fair review of their reasons against the record confirms they brought to bear
all correct principles in their decision.
[37]
That is the
case here. Construing the reasons in a holistic and fair way, the Federal Court
did not alter the “reasonable
prospect of success” ground. Rather, it asked
itself whether the proposed amendments had a reasonable prospect of success,
added no gloss to that question, and found on the facts and the law that the
amendments could not possibly succeed.
[38]
In this regard, the Federal Court found (at
para. 7) that “[e]ven with a generous interpretation of
the evidence put forward by Teva, there is no possibility that relief under
section 53 of the Patent Act would be available.” The evidence proffered
by Teva in support of its proposed pleadings amendment is concerned with the
issue of obviousness at a time before the claimed invention was obtained and
had nothing to do with what Gilead knew or believed when it filed its
application or whether the efficacy of the untested compounds could be
predicted from those that were tested and found to be useful. The Federal Court
also found that Teva had taken too much from the scientists’ statements,
misinterpreting their import (at paras. 7 and 8). In its view, the scientists’
statements, properly interpreted, were nothing more than expressions of
scientific uncertainty during the inventive process and did not support Teva’s
proposed amendments. Finally, the Federal Court noted (at para. 5) that the
proposed amendments raise very serious allegations of fraud that require strong
supporting evidence.
[39]
The Federal Court’s analysis in this regard
shows an understanding and application of proper legal principles. Further, its
analysis of the facts before it and its application of the legal principles to
those facts is not vitiated by palpable and overriding error.
[40]
As for the Federal Court’s reference to Hryniak,
viewed in its proper context it was nothing more than an attempt to reinforce
the idea that—for reasons of access to justice, proportionality and judicial
efficiency—amendments that do not have a reasonable prospect of success should
not be permitted to go forward. That is a truism: proposed amendments that
cannot succeed should be cast aside.
H.
Analysis of the order made on the second motion:
the January 19, 2015 order
[41]
The Federal
Court found Teva’s second motion to be based on “essentially the same factual matters” as the first motion. Indeed,
in advancing its second motion, Teva relied on the same discovery evidence that
it said prompted the first motion.
[42]
The Federal
Court dismissed Teva’s motion for basically the same reasons it dismissed the
first. It found again that Teva had read too much into the discovery evidence.
In this regard, the Federal Court reiterated what it said in para. 7 in its
reasons for the November 3, 2014 order: the evidence could not be reasonably
construed in the manner Teva was construing it and so the proposed amendment
could not succeed in law.
[43]
The Federal
Court also observed (at para. 5 of its January 19, 2015 order) that Teva’s
second motion in effect encouraged it to sit on appeal of its disposition of
the first motion. In so many words, it found that the second motion was an
instance of improper relitigation of the first motion.
[44]
The Federal
Court added a further reason for rejecting the proposed amendments as having no
reasonable prospect of success. In its view, Teva had improperly conflated the
concepts of inutility (under s. 2 of the Patent Act) and insufficiency
(under ss. 27(3) of the Patent Act), a methodology inconsistent with
this Court’s holding in Pfizer Canada Inc. v. Canada
(Minister of Health), 2008 FCA 108, [2009] 1 F.C.R.
253. Whether or not Gilead could
predict or did predict the utility of all of the claimed compounds says nothing
about whether the person of skill had sufficient information to work the
invention.
[45]
I see no
legal error in any of the Federal Court’s analysis, nor any palpable and
overriding error. I have the following additional specific comments.
[46]
Teva
submits that the Federal Court applied too high a standard in assessing whether
its proposed amendment had any reasonable prospect of success. It suggests that
the Federal Court improperly required Teva not just to show that the grounds
advanced by the amendments were tenable, but to go further and to prove its
case to a high level of persuasion. Teva stresses that this Court has adopted a
liberal approach to pleading amendments and the Federal Court went against that
approach: see, e.g., Anderson Consulting v. Canada, [1998] 1 F.C.
605, 220 N.R. 35; Merck & Co., Inc. v. Apotex
Inc., 2003 FCA 488, [2004] 2 F.C.R. 459 at para. 31.
[47]
Construing
the Federal Court’s reasons in a holistic and fair way, I do not agree that the
Federal Court imposed too high a burden upon Teva or otherwise applied a test
wrong in law. Rather, this is a case where on the facts the Federal Court found
that Teva’s proposed amendments did not have even a remote chance of success.
[48]
Teva also
submits that the Federal Court was wrong to characterize its second motion as
essentially a rerun of the first or an appeal of the first.
[49]
This
submission I also reject. The Federal Court’s characterization was based on its
appreciation of the facts before it and it did not commit palpable and
overriding error in adopting that characterization. Indeed, I agree with the
Federal Court’s characterization of the motions before it.
I.
Other submissions by
Gilead
[50]
Gilead
advances other submissions in support of the dismissal of the motions, such as
the lack of particularity in the amendments sought in the first motion, the
prejudice it would suffer as a result of the amendments being sought late, and
the fact that long ago, during the proceedings under the PMNOC Regulations,
Teva was aware of the issues it now seeks to add to the statement of claim at
this late date.
[51]
It is
unnecessary to deal with these submissions except to note that these would
provide additional bases for upholding the orders the Federal Court made.
J.
Proposed disposition
[52]
I would
dismiss the appeals with costs.
"David Stratas"
"I agree.
Eleanor R. Dawson J.A."
"I agree.
Yves de
Montigny J.A."
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