Docket: T-300-16
Citation:
2016 FC 606
Ottawa, Ontario, May 31, 2016
PRESENT: The Honourable Mr. Justice Manson
|
BETWEEN:
|
|
THE REGENTS OF
THE UNIVERSITY OF CALIFORNIA AND TEARLAB CORPORATION
|
|
Plaintiffs
|
|
and
|
|
I-MED PHARMA
INC.
|
|
Defendant
|
ORDER AND REASONS
[1]
The Plaintiff, TearLab Corporation [TearLab],
seeks an interlocutory injunction to prevent the Defendant, I-MED Pharma Inc.
[I-MED], from selling its i-Pen osmolarity measuring device and i-Pen microchip
Single Use Sensors [collectively, the i-Pen System] pending determination at
trial on the issues of patent infringement and validity.
[2]
I-MED also seeks security for costs in defending
against both the action and the interlocutory injunction, as neither of the
Plaintiffs is ordinarily resident in Canada.
I.
Background
[3]
The undisputed facts were set out by Justice
James Russell in his decision in the previous interim injunction motion brought
in this case (University of California v I-MED Pharma Inc, 2016 FC 350).
[4]
The Plaintiff, the Regents of the University of
California [the University], owns Canadian Patent No. 2,494,540 [the ‘540
Patent], entitled “Tear Film Osmometry”. The
Canadian patent application for the ‘540 Patent was filed on March 25, 2003,
and issued on June 3, 2014. It grants the University the exclusive right to
make, use, import, and sell, in Canada, the invention claimed in the ‘540
Patent until its expiry on March 25, 2023.
[5]
The Plaintiff and moving party on this motion, TearLab,
is a public company with shares listed on the Toronto Stock Exchange. TearLab
is the exclusive licensee under the ‘540 Patent in Canada. The University
consents to the relief sought by TearLab, but is not a moving party.
[6]
The ‘540 Patent generally relates to diagnostic
devices, systems and methods for measuring the osmolarity of sample fluids,
including tear fluid. These measurements of tear fluid are useful for
diagnosing and treating dry eye disease [DED], a condition affecting up to 30%
of the Canadian population.
[7]
TearLab markets the TearLab Osmolarity System [the
TearLab System] to Canadian eye-care clinicians, such as optometrists and
ophthalmologists, as well as certain Canadian eye-care research organizations.
[8]
The TearLab System includes a pen, configured
for receiving a test card microchip, and a reader. To perform a test, a
clinician inserts a test card microchip into the pen and places the end of the
chip along the lower conjunctiva of a patient’s eye to collect a sample of the
patient’s tear film. The pen and chip are then docked into the reader which
displays the osmolarity of the tear sample to the clinician by passing an
electric current through the tear sample (known as electrical impedance).
[9]
TearLab rents or loans the TearLab System to
users, who must commit to purchasing a minimum number of test card microchips
from TearLab per quarter or year. Users may cancel their contract with TearLab
at the end of yearly anniversaries, and thus can return the TearLab System
fairly promptly if a competing and lower-priced device entered the market.
[10]
TearLab has spent time and substantial economic
resources testing the TearLab System in a number of clinical trials to
establish its safety, reliability and efficaciousness for regulatory approval.
[11]
In December 2009, Health Canada approved the TearLab
System for sale in Canada as a Class III Medical Device.
[12]
Following approval for the Canadian market, TearLab’s
initial challenge was convincing eye-care clinicians that hyperosmolarity is a
reliable and quantitative indicator of DED. This concept was not well known amongst
Canadian clinicians, who were reluctant to accept that measuring osmolarity is
an effective diagnostic method for DED.
[13]
TearLab conducted numerous further clinical
trials and published the results in peer reviewed journals in order to
demonstrate that patient symptoms and the pathology of DED were linked to
hyperosmolarity. Nonetheless, a significant proportion of Canadian eye-care
clinicians have not yet adopted the technology, which TearLab views as a future
market opportunity.
[14]
In mid-January 2016, TearLab discovered that I-MED,
a Montreal-based company that focuses on human and veterinary eye care, was
offering for sale a tear osmolarity measuring device called the “i-Pen System”, which I-MED initially told Canadian
eye-care clinicians would be available in March 2016.
[15]
The i-Pen System is a tear-fluid collection and
testing device for measuring tear osmolarity in patients using impedance
measurements of a tear film sample. The User Manual describes that the i-Pen
System consists of a “Single Use Sensor” which
is inserted into a hand-held reader unit that displays the osmolarity test
result.
[16]
I-MED offers for sale the i-Pen System’s Single
Use Sensors at a substantially lower price than the corresponding chips of the TearLab
System. As well, I-MED’s customers are not obligated to purchase a minimum
number of the Single Use Sensors.
[17]
On February 8, 2016, TearLab commenced the
present patent infringement proceeding, alleging the i-Pen System, its Single
Use Sensor, and the indicated methods of use, each fall within the scope of at
least one of claims 1, 2, 5, 6, 8, 13, 14, 16, 25 and 26 of the ‘540 Patent.
[18]
On March 1, 2016, TearLab filed this motion for
an interlocutory injunction, and on March 18, 2016, TearLab filed a motion for
an interim injunction, seeking to enjoin I-MED from launching the i-Pen System
in Canada before the hearing of the interlocutory injunction.
[19]
I-MED filed its Statement of Defence and
Counterclaim dated April 28, 2016, alleging non-infringement (including the
Gillette Defence) and invalidity of the ‘540 Patent claims, on the basis of
anticipation, obviousness, insufficient disclosure, claim ambiguity, failure to
disclose best mode, and claims broader than any invention made or disclosed (in
patent jargon, the “litany” of validity attacks).
[20]
On March 24, 2016, Justice Russell dismissed TearLab’s
motion for an interim injunction (2016 FC 350). He found that TearLab did not
establish irreparable harm, particularly on issues of quantification, or that
the balance of convenience favoured granting an injunction. Specifically,
Justice Russell determined that TearLab’s experts were not qualified to
convince the Court that the harm TearLab alleges could not be compensated by
way of damages and he gave little or no weight to evidence provided by Mr.
Tierney, Dr. Jackson and Mr. Berg. He found:
a)
Mr. Tierney, a retired Business Director of
Allergen Eye Care with experience in the Canadian Eye Care market, did not
establish he was qualified to render an expert opinion on market forecasting
and quantifiable damages, nor did he provide a factual basis for several of his
assertions;
b)
Dr. Jackson, a practicing ophthalmologist,
provided opinions that are speculative and unrelated to quantification issues;
and
c)
Mr. Berg, TearLab’s Vice President of Regulatory,
and Mr. Smith, Vice President of International Markets for TearLab, provided no
relevant evidence on quantification issues and irreparable harm.
[21]
Justice Russell found that I-MED provided direct
evidence on the issue of irreparable harm through its witness, Dr. Rosenblatt,
an expert in marketing and forecasting in the pharmaceutical and health
industry, who was qualified and whose evidence explained why TearLab’s feared
damages are quantifiable.
[22]
At the time of the interim injunction, Justice
Russell acknowledged that none of the experts had been cross-examined on their
affidavits.
[23]
Despite TearLab’s requests, I-MED has refused to
disclose the launch date of the i-Pen System, and has also refused to provide a
minimum number of days of advanced notice pre-launch. The i-Pen System was
approved in Canada as a Class II Medical Device in January 2015, the license
was suspended on September 23, 2015, and was reinstated on May 13, 2016. In
contrast, the TearLab system is categorized as a Class III Medical Device, which
requires more stringent qualifications for approval.
[24]
TearLab’s affidavits filed for the interim
injunction from Dr. Sullivan, Mr. Smith, Mr. Berg, Dr. Jackson and Mr. Tierney
are deemed to have been filed in this motion. TearLab was also granted leave to
file reply evidence of Dr. Hollis and Mr. Smith for this motion.
[25]
I-MED responded with the affidavits of Mr. Hofmann,
Vice-President of I-MED, and Dr. Rosenblatt, and sur-reply evidence consisting
of the affidavit of Denise Pope (a paralegal at Norton Rose) and a second
affidavit of Dr. Rosenblatt, sworn April 27, 2016.
II.
Issues
- Whether an
interlocutory injunction should be granted to prevent I-MED from
distributing and selling the i-Pen System in Canada.
- Whether the
Defendant is entitled to additional security for costs, and if so, how
much.
III.
Analysis
A.
Interlocutory Injunctions
[26]
The conjunctive three-part test for an interim
or interlocutory injunction settled by the Supreme Court of Canada in RJR -
MacDonald Inc v Canada (Attorney General), [1994] 1 S.C.R. 311 [RJR
MacDonald], requires that TearLab establish:
- a serious issue
to be tried;
- that they will
suffer irreparable harm if the injunction is not granted; and
- that the balance
of convenience favours the granting of an injunction.
[27]
These factors are interrelated and should not be
assessed in isolation (Movel Restaurants Ltd v EAT at Le Marché Inc,
[1994] FCJ No 1950 (Fed TD) at para 9, citing Turbo Resources Ltd v Petro
Canada Inc (1989), 24 CPR (3d) 1 (FCA) [Turbo Resources]).
(1)
Serious Issue
[28]
The threshold for determining whether there is a
serious issue to be tried is low. I agree with TearLab that there is a serious
issue to be tried, notwithstanding I-MED’s argument there is no serious issue
because TearLab only speculated about patent infringement after consulting a
draft User’s Manual for the i-Pen System.
[29]
I-MED’s Defence and Counterclaim challenges the
validity of the ‘540 Patent and alleges that the i-Pen System does not infringe
any claims of the ‘540 Patent. However, there is an initial presumption that
the ‘540 Patent is valid, and based on the facts before me there is at least an
arguable case and a serious issue that I-MED’s i-Pen System, and the specified
methods of use, may fall within the scope of one or more of claims 1, 2, 5, 6,
8, 13, 14, 16, 25 and 26 of the ‘540 Patent.
[30]
TearLab has also raised the issue of whether I-MED
also entered the Canadian market illegally during the period of September 2015
to April 2016, when their approval from Health Canada was suspended, but I do
not find this issue to be of much weight in deciding any of the RJR-MacDonald
tripartite test.
(2)
Irreparable Harm
[31]
Though the test is conjunctive and necessitates
the weighing of all factors, the pivotal issue before the Court on this motion
is whether TearLab has established it will suffer irreparable harm should the
injunction not be granted.
[32]
In RJR MacDonald, above, the Supreme
Court defined “irreparable” as referring to “the nature of the harm suffered rather than its magnitude.
It is harm which either cannot be quantified in monetary terms or which cannot
be cured, usually because one party cannot collect damages from the other”
(at para 64). The threshold of establishing irreparable harm is very high: harm
is not irreparable solely because precisely calculating damages would be
difficult, or because it cannot be exactly quantified, provided there is some
reasonably accurate way of measuring those damages (Merck Frosst Canada Inc
v Canada (Minister of Health) (1997), 74 CPR (3d) 460 at 464 (Fed TD); Merck
& Co v Apotex Inc, [1993] FCJ No 1095 at para 42).
[33]
The plaintiff is required to adduce clear and
non-speculative evidence that irreparable harm will follow if the injunction is
not granted (Aventis Pharma SA v Novopharm Ltd, 2005 FC 815, at paras
59-61 [Aventis Pharma] aff’d 2005 FCA 390).
[34]
In a quia timet application, in which the
infringing party is not yet in the marketplace, an applicant may establish
irreparable harm by presenting logical inferences from the evidence submitted,
as there is usually no evidence of actual harm (Sports Authority Inc v
Vineberg (1995), 61 CPR (3d) 155 at para 4 (Fed TD)). While the application
before me is not strictly a quia timet proceeding, given there is
evidence of I-MED making use of its i-Pen System in Canada, I do accept that
the alleged infringing use is, to date, minimal, and that TearLab’s primary
concern is I-MED’s threat to expand such use in the near future as being the
substantial threat of irreparable harm.
[35]
TearLab alleges it will suffer the following
irreparable harm:
- Harm to TearLab’s
goodwill and reputation that is impossible to determine;
- An
unquantifiable and permanent loss of market opportunity;
- An inability to
quantify damages; and
- I-MED’s
inability to pay a monetary award after trial.
[36]
The potential irreparable harm stemming from an
inability to quantify damages is the most compelling of TearLab’s arguments,
and for which they have provided the most substantive and supported evidence.
(a)
Harm to Goodwill and Reputation
[37]
TearLab argues the Court should disregard Dr.
Rosenblatt’s evidence that TearLab’s reputation would not be damaged, given his
lack of expertise in the Canadian ophthalmic market. It is evident that Dr.
Rosenblatt has more limited experience in the Canadian ophthalmic market than TearLab’s
affiants, and I agree his evidence on the issue of reputation is of little
value. However, in the context of this motion, I find he is qualified to
express an opinion on whether the market losses of the kind raised by TearLab
can be quantified.
[38]
Moreover, it is TearLab who bears the onus to provide
the Court with clear evidence of irreparable harm to their goodwill and
reputation. Though Dr. Jackson and Mr. Tierney are highly knowledgeable in the
ophthalmology market, their evidence on the issue of damage to reputation and
loss of market share, despite not having been cross-examined upon, remains
speculative.
[39]
Dr. Jackson’s opinion that “eye-care clinicians who purchase the i-Pen System would be
upset at TearLab for obtaining an injunction preventing I-MED from selling the
microchips” if the i-Pen is taken off the market following trial is
speculative. As is Mr. Tierney’s evidence, which echoes that “doctors will likely blame TearLab” when they cannot
use the i-Pen System they paid for.
[40]
I agree with Justice Russell that neither of TearLab’s
experts provides support for their assertions on the issue of reputational
damage, and I am not persuaded that there is any clear, non-speculative
evidence that eye care clinicians will think less of TearLab should the
injunction not issue. TearLab has not established a basis for clear irreparable
harm to goodwill and reputation.
(b)
Permanent Loss of Market Share
[41]
TearLab also relies on the evidence of Dr.
Jackson and Mr. Tierney in support of its assertion that the launching of the
i-Pen System and its subsequent removal from the marketplace will cause
irreparable harm. The evidence alleges that “TearLab
will suffer a permanent loss of customers and will not be able to re-establish
its current pricing” (Mr. Tierney), as it is impossible to discern how
many clinicians will “refuse to pay an increased
post-injunction cost of the chip and how many will, as a direct result, abandon
osmolarity testing”, or for those who have not used it, may refuse to
ever use TearLab’s System (Dr. Jackson).
[42]
TearLab also analogises the present case to the
House of Lords decision in American Cyanamid v Ethicon Ltd, [1975] RPC
13 at 542 [American Cyanamid], and states that damages would not provide
adequate compensation as:
- TearLab is the
exclusive licensee under the ‘540 Patent and ought to be able to increase
its market share;
- the i-Pen System
is not yet legally present on the market, and while TearLab is
establishing a new market for osmolarity testing, many eye-care clinicians
have not yet adopted the technology, which represents an unquantifiable
market opportunity that will be lost; and
- if Canadian
eye-care clinicians purchase the i-Pen System, it may be commercially
impractical to deprive the public of I-MED’s product by insisting on a
permanent injunction after trial, as this may have a damaging effect on TearLab
in such a specialized market.
[43]
In contrast, I-MED argues that the Federal
Courts have consistently held that the type of harm TearLab alleges it will
suffer is not irreparable (Aventis Pharma, above, at paras 33, 34, 36,
38, 40-45; Merck Frost Canada Inc v Canada (Minister of Health), (1997),
74 CPR (3d) 460 at 462 (Fed TD)).
[44]
In Aventis Pharma, above, the plaintiff
claimed it would suffer the same types of irreparable harm as alleged here
should an injunction not issue, including permanent loss of market share and
loss of opportunity for increasing market share; permanent price reduction; and
permanent damage to goodwill and reputation due to the sale of a less efficacious
product. On similar evidence to the present case, the Court found insufficient
clear evidence that irreparable harm would occur if the injunction were not
issued.
[45]
While American Cyanamid, above, is
certainly relevant for the principles underlying interlocutory injunctions, I
agree with the Defendant that analogising to a somewhat dated decision of the
House of Lords does not trump more recent and relevant decisions of Canadian
Courts that have qualified and expanded upon those principles in the Canadian
context.
[46]
As in Aventis Pharma, above, TearLab’s
arguments of the potential for loss of market share and permanent price
reduction of their product are unsubstantiated, unrelated to any issues of
whether such alleged damage could be quantified, and are ultimately speculative.
(c)
Inability to quantify damages
[47]
TearLab also submits irreparable harm ensues
from the impossibility of calculating lost sales, as there is no reasonable
methodology available to quantify the loss arising from I-MED’s activities (Reckitt
Benckiser LLC v Jamieson Laboratories Ltd, 2015 FC 215, aff’d 2015 FCA
104). TearLab claims this is supported by Mr. Tierney’s evidence, Dr. Hollis’
opinion, Dr. Rosenblatt’s incorrect prediction, and the fact that TearLab
itself could not properly forecast sales in the Canadian market. Each are dealt
with in turn below.
(i)
Mr. Tierney’s Evidence
[48]
Mr. Tierney’s evidence was that given the
growing market, TearLab’s overall losses will be unquantifiable and there is no
model to determine what impact I-MED’s presence on the Canadian market will have
on TearLab. I agree with Justice Russell that Mr. Tierney, although having
experience in the Canadian eye-care market, has no expertise in market
forecasting or damages assessment, and thus his opinion that losses are
unquantifiable is of limited value to the Court.
(ii)
Dr. Hollis’ Reply Evidence to Dr. Rosenblatt
[49]
Defence expert Dr. Rosenblatt’s first affidavit
proposes that either of two models could be used to estimate damages: (i) an
epidemiological model based on the number of patients suffering from DED; or
(ii) a quantitative statistical model that forecasts TearLab’s “but-for” sales for the period 2016-2018 using monthly
sales data from 2012-2016, from which any negative deviation would be
attributed to I-MED.
[50]
Dr. Hollis’ takes issue with Dr. Rosenblatt’s
epidemiological model, as it requires an accurate estimate of the incidence of
DED, which is not currently available. Dr. Rosenblatt’s report indicated the
incidence of DED in Canada to be between 8% and 29%, yet TearLab has only
penetrated a fraction of the affected population to date. Given this range, any
estimate of damage quantification would be wholly uninformative. Moreover, Dr.
Rosenblatt’s testimony on cross-examination demonstrated the multiple layers of
analysis and additional research required to predict damages based on
epidemiology.
[51]
Though TearLab’s position on this issue is
persuasive, on the evidence in this motion, the non-viability of using Dr.
Rosenblatt’s epidemiological model for calculating reasonable damages is immaterial.
Dr. Rosenblatt testified he was not asked to, and did not, prepare this model,
but would be able to after trial, if necessary.
[52]
Dr. Hollis’ affidavit considers four scenarios
depending upon whether the i-Pen System will be perceived as equally effective
as the TearLab System and whether the pricing of the systems is the same or
different. In my view, only one of the scenarios presented is applicable to the
present case.
[53]
The hypothetical scenarios wherein the i-Pen
System is either clinically superior or inferior than the TearLab System are of
little worth to the Court in this motion. Firstly, Dr. Hollis’ evidence in
these scenarios - that for instance, I-MED’s inferior device may result in
clinicians’ rejection of osmolarity testing as a useful clinical tool altogether
- is based on assumption and speculation, rather than fact or experience.
Indeed, Dr. Hollis admitted on cross-examination he has no basis to offer an
opinion on clinicians’ perceptions or experiences.
[54]
As well, Dr. Hollis himself opined it is unlikely
that sufficient information will be collected to enable a clinical comparison
between the I-MED and TearLab Systems by the end of trial. I find the fact that
Health Canada has approved the i-Pen System makes any alleged harm based on
allegations of reduced efficacy and safety highly speculative (Aventis
Pharma, above, at para 99).
[55]
Dr. Hollis’ scenario where the two systems are
perceived as equal, yet the I-MED system is cheaper - the situation at hand -
is pertinent to the issue of whether damages could be reasonably quantified in
this case following trial. This is also the situation to which Dr. Rosenblatt’s
forecast modelling evidence speaks.
[56]
Dr. Hollis criticizes Dr. Rosenblatt’s quantitative
statistical model on the basis that future prediction based on historic sales
data of the TearLab System is impossible.
[57]
Not only have TearLab’s sales been unstable, but
Dr. Hollis asserts that the cheaper cost of the i-Pen System may generate
higher sales, which would render inaccurate any prediction of TearLab’s damages
based on I-MED’s sales.
[58]
As well, Dr. Hollis claims the volatility of TearLab’s
data challenges the underlying assumption in Dr. Rosenblatt’s model that TearLab’s
historical sales trends will continue unchanged into the next two years. There
is substantial variation by month in the take-up of readers of the TearLab
System, which in-turn drives card-sales. Moreover, Dr. Rosenblatt’s model has
not accounted for the alleged effect I-MED’s marketing has already had on sales
data, and recent changes to TearLab’s marketing strategy in Canada means it is
impossible to trend historical data forward to predict damages with any level
of certainty.
[59]
To challenge Dr. Rosenblatt’s model, Dr. Hollis
graphically generated a prediction using TearLab’s sales data. He claims the
range of the confidence interval (a 10-fold range, according to Dr. Hollis’
calculations) using the quantitative statistical model based on monthly sales
data will not provide a reasonable estimate of damages suffered by TearLab if
an injunction is not issued.
[60]
Dr. Hollis also opines that historical sales
data for new products does not provide a predictable underlying trend upon
which to forecast sales and quantify future damages, as sales growth can take
on many forms.
[61]
Damages are incalculable, in Dr. Hollis’ view,
because methodologies from the pharmaceutical market are inapplicable to the
medical device market, and no obvious comparator markets to osmolarity testing
currently exist. He identifies the following factors that distinguish the pharmaceutical
from the tear osmolarity market:
- the tear
osmolarity market is unique and it is difficult to identify a suitable
comparator market;
- even if there
were an adequate comparator market, there is insufficient data, and a lack
of experience using such data to make predictions or even identify whether
or not the market is an appropriate analogue;
- TearLab’s sales
data is highly volatile, unlike in pharmaceutical cases where the markets
are relatively well established, and sales are steady over time;
- there is no
comparative evidence on the TearLab versus the i-Pen Systems, akin to
bioequivalence studies in the pharmaceutical context;
- in this market,
unlike pharmaceuticals, the clinicians are the purchasing customers, in
part for patient benefit but also for earning profits.
[62]
I have some sympathy for TearLab’s position on
the lack of comparator data for the market in this particular field of medical
devices, yet I find Dr. Rosenblatt’s evidence, discussed below, adequately
explains that an acceptable analogue could be determined.
[63]
Moreover, as I-MED indicates, sales data
confirms TearLab has made sales in Canada since November 2009, and it is hardly
a “nascent” market. Difficulty in calculating damages in such a market is not
indicative, by itself, of irreparable harm, and TearLab’s presence in the
market for over six years weakens Dr. Hollis’ assertion that the nascent market
makes damages unquantifiable.
[64]
Effectively, TearLab’s position is that there is
no basis for any sound prediction or estimate of damages in Dr. Rosenblatt’s “but-for” forecast of damages – his calculations hinge
on an “anything goes” attempt to legitimize his
theory which arguably, it may be inferred, is more akin to an intended
hypothesis than any viable theory of damages.
[65]
Ultimately, though TearLab’s assertions may be
plausible, the Court is left guessing about the consequences of the alleged
market complexities and interrelated variables raised by TearLab. I find the
evidence presented by Dr. Hollis insufficient to constitute “clear and not
speculative” evidence that actual unquantifiable harm will occur.
[66]
Notwithstanding Dr. Hollis’ above criticisms, I
find that Dr. Rosenblatt’s evidence adequately and sufficiently explains that TearLab’s
past sales can indeed be used to reasonably calculate damages. Dr. Rosenblatt’s
but-for projection uses historical data and projects it into the future. On
cross-examination he explained that this is the basic assumption of statistical
forecasting analysis: that patterns that have existed in the past will continue
to occur into the future.
[67]
Dr. Rosenblatt’s analysis “freeze-framed the world in March of 2016” and made a
prediction of TearLab’s sales in a scenario where no other events occur. He
explains that future changes in the marketplace do not invalidate his model
because any intervening and unexpected future events, which would not be
hypothetical after trial, would be added to the forecast through an adjustment
of the statistical projection.
[68]
As well, at this stage of the proceedings, the
incomplete information before Dr. Rosenblatt on the alleged effect of I-MED’s
marketing required to accurately quantify the loss does not undermine his
position that there are, and will be after trial, ways of quantifying actual
losses in monetary terms.
[69]
On the issue of comparator markets, Dr.
Rosenblatt acknowledged there is no database currently tracking direct sales of
these devices from companies to ophthalmologists or optometrists and then on to
patients. However, his testimony was that it is standard practice to consider a
variety of comparators to determine acceptable analogues for assessing accuracy
of a prediction, including “the type of market the
product plays in, possibly the types of physicians, its efficacy, its safety,
its clinical benefit, is there a tremendous amount of unmet need, is it an
acute product, is it for chronic therapy, et cetera”.
[70]
Though Dr. Hollis suggested that TearLab’s
damages could not be estimated with “precision”
or “certainty”, this standard is much higher
than the “reasonable” standard this Court
requires. I accept the evidence of Dr. Rosenblatt that, notwithstanding TearLab’s
general assertions concerning the unique nature of this market and the
variables that come into play, there are ways of quantifying the losses TearLab
claims will be impossible to predict. His methodology shows that the TearLab
sales data provided would permit a qualified expert to estimate damages through
trial, and account in the future for other variables prevailing at the time
when actual losses will have to be demonstrated. Theoretical complexity in
calculation is not alone clear evidence that damages are not capable of
reasonable quantification (Aventis Pharma, above, at para 70).
[71]
Moreover, I-MED raises a valid inconsistency in TearLab’s
position: though TearLab claims irreparable harm is established on the basis
that damages are incalculable, it nevertheless provides an undertaking as to
damages (i.e. implicitly acknowledges they are quantifiable) in the event an
injunction is granted if they lose at trial. While I appreciate that TearLab
has made arguments regarding reputational damage, I find that their only claim
with any substance is on the issue of unquantifiability, and if their position
is that their undertaking as to damages can be quantified for I-MED following
trial, I see no reason why it would be impossible to quantify them for TearLab
in the opposite scenario.
(iii)
TearLab’s Inability to Forecast
[72]
Mr. Smith’s evidence on cross-examination was
that TearLab attempted to apply a mathematical forecasting model to the
Canadian market, which was “completely useless”
given the insufficiency of the availability of inputs and the history of data.
[73]
This factor is unpersuasive and does not support
an inability to quantify damages following trial: the Court is provided no
reference upon which to discern whether purported inaccuracies in TearLab’s
forecasting stemmed from the unavailability of data or other unknown factors.
(d)
I-MED’s inability to pay a monetary award after
trial
[74]
TearLab asserts that a defendant’s inability to
pay a monetary award after trial can constitute irreparable harm (Turbo
Resources, above, at para 29).
[75]
Mr. Hofmann, I-MED’s VP, was asked to bring
various financial documents to his cross-examination in a Direction to Attend,
which he did not do. Accordingly, TearLab requests that the Court draw an
adverse inference that I-MED would not be in a position to pay a monetary award
after trial due to its failure to produce documents requested in a Direction to
Attend (Ottawa Athletic Club Inc v Athletic Club Group Inc, 2014 FC 672
at paras 138, 139; Eli Lilly Canada Inc v Mylan Pharmaceuticals ULC,
2015 FC 178 at paras 119-120). Mr. Hofmann admitted he had access to I-MED’s
records, yet he did not bring these documents to his cross-examination.
[76]
Counsel for I-MED refused to allow Mr. Hofmann
to answer questions concerning I-MED’s financial state, its insurance policy,
and its ability to satisfy a monetary judgment after trial, on the basis that
I-MED’s financial standing and insurance was not relevant: it was not pleaded
in the motion, nor was it at issue with respect to Mr. Hofmann’s affidavit.
[77]
By way of the affidavit of Denise Pope, and supposedly
as “sur-reply”, I-MED submitted as evidence its
insurance policy, not produced during cross-examination, demonstrating that
I-MED is insured for the costs of these proceedings and any damages up to a
limit of USD $2,000,000 (approximately CAD $2,600,000).
[78]
Though I agree with TearLab this is not proper
sur-reply evidence, I am unprepared to draw an adverse inference on I-MED’s
impecuniosity. That issue was raised after the fact, was not plead in the
motion for injunction, or addressed or at issue in Mr. Hofmann’s affidavit and
therefore is not properly before the Court.
(e)
Conclusion on Irreparable Harm
[79]
Patent rights are economic in nature and there
is usually no reason why damages ensuing from infringement are unable to be
measured or calculated in a reasonably accurate way (Pfizer Ireland
Pharmaceuticals v Lilly Icos LLC, 2003 FC 1278 at para 27 citing Cutter
Ltd v Baxter Travenol Laboratories of Canada Ltd (1980), 47 CPR (2d) 53
(FCA), leave to appeal denied (1980), 47 CPR (2d) 249 (note) (SCC)).
[80]
In fact, Dr. Hollis himself agreed that in cases
for which he has assisted the Court in quantifying damages, although difficult
and potentially involving an overwhelming variety of scenarios, he has always
been able to determine an appropriate quantum of damages.
[81]
This case is no different. TearLab has not
provided sufficient clear evidence it will suffer unquantifiable and
irreparable harm if the injunction is not issued, while Dr. Rosenblatt’s
evidence showed that the loss claimed by TearLab is not so unique and
exceptional that it falls beyond the possibility of reasonable quantification.
(3)
Balance of Convenience
[82]
My conclusion on the balance of convenience
aspect of the tripartite conjunctive test set out in RJR MacDonald flows
from my above finding that TearLab has not established it will suffer irreparable
harm if an injunction is not issued pending trial, and my conclusion that
damages will be an adequate remedy.
[83]
I find that the balance of convenience favours
I-MED.
[84]
TearLab argues maintenance of the status quo favours
them, in that I-MED would suffer relatively little inconvenience if an interlocutory
injunction is issued, compared to the harm TearLab would sustain if the
interlocutory injunction were refused and I-MED launched its infringing product
(American Cyanamid, above, at 542).
[85]
I disagree.
[86]
Though the i-Pen System was licenced on May 13,
2015, and had only been on the market for four days by the time of the hearing
of the injunction motion, the i-Pen System is currently on the market, and
I-MED has been educating optometrists and ophthalmologists about it since July
2015. Moreover, preservation of the status quo is a consideration “[w]here other factors appear to be evenly balanced” (American
Cyanamid, above, at 542). That is not the case here.
[87]
If an interlocutory injunction is granted, I-MED
will be entirely excluded from the market, and will lose all of its potential
revenue in respect of the i-Pen System and any strides it has made in the
market thus far. If an interlocutory injunction is refused, TearLab will lose
some potential revenue, and will be subjected to competition and a resultant
modification of the market it has built in Canada until now – which the
evidence demonstrates it has not yet been able to truly penetrate.
[88]
An interlocutory injunction is an extraordinary
remedy. For the reasons provided, given the lack of clear and not speculative
evidence of irreparable harm, and the above consideration of the balance of
convenience, the application for an interlocutory injunction is dismissed.
B.
Security for Costs
[89]
I-MED requests that the Plaintiffs be ordered to
post security for costs in the amount of $100,000.00 to cover I-MED’s costs
through a first round of discovery, without prejudice to request further
security at a later time (Rule 416(2)).
[90]
Both Plaintiffs fall under Rule 416(1)(a) of the
Federal Courts Rules, SOR/98-106: they are ordinarily resident outside
of Canada, being non-Canadian corporations incorporated in the United States of
America. Accordingly, the Plaintiffs have a burden to demonstrate sufficient
Canadian assets to pay costs, and to establish why the Court should not
exercise its discretion to grant the security sought by the Defendant (Moroccanoil
Israel Ltd v Shoppers Drug Mart Corp, 2010 FC 901 at para 6).
[91]
I-MED’s motion includes a skeleton bill of
costs, assessed at the upper end of Column IV of Tariff B, which it asserts is
not uncommon for complex intellectual property cases (Eurocopter v Bell
Helicopter Textron Canada Ltee, 2012 FC 842 at para 22). I-MED submits the
initial amount requested corresponds to one-sixth of the full amount of costs
awarded by this Court in recent patent infringement and validity proceedings (Janssen
Inc v Teva Canada Ltd, 2012 FC 48 at para 236; Hershkovitz v Tyco Safety
Products Canada Ltd, 2010 FC 292 at para 69).
[92]
TearLab argues it should not have to pay
security for costs: it has bank accounts with the Royal Bank of Canada with a
consistently positive balance sufficient to pay I-MED’s costs.
[93]
Alternatively, TearLab argues its voluntarily
payment of $50,000 into Court is adequate. The amounts sought by I-MED are
excessive, and at such an early stage of the proceedings, a security for costs
order should be taxed in the middle of Column III of Tariff B, as the
complexity of the proceedings cannot yet be discerned (Faulding (Canada) Inc
v Pharmacia S.p.A., [1997] FCJ No 1490 at para 7; International Control
Systems LLC v Haier America Trading LLC, 2012 FC 214 at para 12). Thus, TearLab
submits the Court should set security for costs at $42,500. TearLab also
asserts the case law cited by I-MED is inapplicable, as those cases address
costs after an event or involve the context of a payment into Court by consent.
[94]
Security for costs does not relate to the costs
of any counterclaim a Canadian defendant makes (Apotex Inc v H Lundbeck A/S,
2010 FC 807 at para 21). Any activities in relation to I-MED’s counterclaim will
not be covered by an award for security for costs.
[95]
The Defendant also sought $150,000.00 in
security to cover its likely costs of defending against the interlocutory
injunction. I agree with TearLab that the request for this relief is not
appropriate in the context of security for costs, as this motion was heard on
the same day as the motion for interlocutory injunction, and the interim
injunction has since passed.
[96]
I find that though TearLab has provided some
evidence it has assets in Canada, the financial and banking information from
TearLab is weak and shows little asset value. I would increase security payable
by TearLab into the Court to a total of $100,000 at this stage of the
proceeding.
[97]
Accordingly, I order that TearLab pay additional
security for costs into Court in the amount of CAD $50,000 within two weeks of
the date of this Order, with I-MED retaining the right to seek additional
security following completion of discoveries.
[98]
Costs are awarded to the Defendant on both the
motion for security for costs and the interlocutory injunction. The parties are
to provide written submissions on costs of this application and on the interim
injunction motion pursuant to Justice Russell’s Order in that proceeding (2016
FC 350) to the Court within ten days of the date of this Order, not to exceed
five pages in length.
[99]
Finally, this matter is one that should proceed
to trial on an expedited basis, if possible. The parties should seriously
consider requesting a trial date at the earliest opportunity.
Email this Content